Business Registration
Company
Compare company setup considerations, director responsibilities, and how a company differs from simpler business structures.
Overview
Company explained
A company in Australia, usually a proprietary limited (Pty Ltd) company, is a separate legal entity registered with ASIC that can own assets, sign contracts and be sued in its own name. That separation is what gives directors and shareholders limited liability.
With that protection comes responsibility. Directors have legal duties, the company must keep proper records and lodge with ASIC, and it is taxed as its own entity rather than at your personal rate.
Cockatoo helps you compare a company against simpler structures so you can decide whether the added protection and credibility are worth the extra obligations.
What to check
Key points
- A company is a separate legal entity with its own ACN, distinct from its owners.
- Shareholders own the company; directors are responsible for running it lawfully.
- Limited liability protects personal assets, though directors still owe duties.
- A company files its own tax return and faces more reporting than a sole trader.
Before you start
What you'll need
- An understanding of director duties under the Corporations Act.
- Clarity on who will be shareholders and who will be directors.
- A view on how shares and ownership will be divided.
- A registered office and principal place of business in Australia.
- A plan for ongoing record-keeping, lodgements and annual reviews.
Process
How it works
- Decide whether limited liability and credibility justify the extra obligations.
- Identify your directors and shareholders and confirm their consent to act.
- Plan the share structure and how ownership and control are split.
- Prepare to meet ongoing duties such as record-keeping and ASIC reviews.
Avoid these
Common mistakes
- Assuming limited liability removes all personal responsibility for directors.
- Setting up a company when a sole trader structure would have been simpler.
- Mixing personal and company money instead of keeping them separate.
- Overlooking ongoing duties like the annual review and changing-detail updates.
Common questions
Company FAQs
How is a company different from being a sole trader?
A company is a separate legal entity with its own ACN, so it can own property and be liable in its own name, giving owners limited liability. A sole trader is not separate from the person, who is personally responsible for debts but enjoys simpler, cheaper administration.
What are a director's main responsibilities?
Directors must act in the company's best interests, with care and diligence, avoid trading while insolvent, and keep accurate financial records. They must also keep company details current with ASIC. These duties apply even in a small, single-director company.
Does a company protect my personal assets?
Generally a company's limited liability means owners are not personally liable for company debts beyond their shares. However, directors can still be personally liable in cases such as insolvent trading or where they have given personal guarantees to lenders.
Is a company more expensive to run?
Yes, typically. A company faces ASIC registration and annual review fees, more complex tax and accounting, and stricter record-keeping than a sole trader. The trade-off is limited liability, a clearer ownership structure and often greater credibility with clients.
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