Many foreign commercial actors are choosing to form a company in Australia, thanks to its reputation as a leading business hub in the developed world. With a national GDP of US$1.3 trillion and approximate GDP per capita of around US$55, 926, the country boasts of high prosperity and productivity. The country holds a clutch of free trade agreements with major trading partners across Asia, the Americas, and Europe. Its open business environment, stable political climate and constant positive economic growth attracts investors from all corners of the globe.
Over recent years, there has been a growing rate of of Latin American business people who are also seeking to take advantage of the business potential Australia offers. Concluded and ongoing bilateral trade negotiations and arrangements are facilitating greater business connections between Latin America and Australia.
Like in most other countries, however, there are certain challenges that foreign business people face when interacting with unfamiliar legal and financial systems. We address 5 key steps international investors must take when forming a company in Australia.
Steps to Form a Company in Australia
1. Choose a business structure
As a foreign investor, the first step to form a company in Australia is to decide the type of legal entity you want to establish. Make sure to research on the different kinds of business structures that exist in Australia, and which is best suited to your commercial activities. That said, you should also seek a professional opinion from a local legal expert before making a final decision. Australia has four main company structures, which include partnership, sole proprietorship, proprietary limited company and a trust.
Many companies in Australia are proprietary limited, in which shareholders have limited liability and are limited to both the share capital they have subscribed as well as the debts which they may have personally guaranteed. This is a low-risk option for foreign investors, as they aren’t held personally liable for any company debts.
Of course, the requirements of starting each of these legal entities in Australia are different. Prospective investors must do thorough research on the different company structures and their requisites, so they can settle for what matches their objectives and method of operation. Knowing the advantages and disadvantages of each of these company structures will equally help potential foreign investors make an informed decision.
2. Choose the name of your company
Investors must choose their company names before officially registering their companies in Australia. The process of filing a company name is simple. Firstly, you’ll need to check the availability of your chosen name against Australia’s database of existing companies. Once you’ve confirmed that your preferred company name is available, you can reserve it with local authorities. To do this, you’ll need to fill out an application form available from the Australian Securities and Investments Commission (ASIC), and lodge it online.
This process costs AU$70, and the reservation for the company name is valid for up to two months. The company name must always show the legal status of the company. For instance, the words ‘Pty’ and ‘Ltd’ are used to identify proprietary companies as well as the liability of its members.
Note: Company versus Business Names
Potential investors must be aware of the difference between a company name and a business name. A company name refers to the legal entity you have registered with ASIC, whereas a business name is any name you have chosen to conduct business under. Choosing a business name isn’t required by law. Without it, your company can still be identified by its unique Australian Company Number (ACN). However, having a business name helps you to easily build and expand your brand in a short period of time.
3. Decide the governance structure for your company
Once you have settled on a particular structure and have reserved your company name, the next step is to draft your company’s constitution or bylaws, which clearly outlines how the business will be governed. During the official registration of your company, you must present a formal document which clearly outlines the rights and duties of the stakeholders of the company. This includes information regarding the roles of the board members, shareholders, and the directors.
It’s useful to note that companies in Australia can either draft their constitution from scratch or adapt it from the Replaceable Rules in the Corporations Act. These Replaceable Rules offer a useful framework for your Australian company’s constitution. From there, you’re free to modify the company’s governance structure from the Replaceable Rules framework to suit your business needs.
4. Register your company
Once you have chosen a company structure and picked a company name, you can then register your company in Australia through the Department of Industry, Innovation and Science. This department is known to offer a multifunctional online registration service known as the Business Registration Service (BRS).
Through the BRS, you can actually make a series of registrations pertaining to your company, including:
- Company name/an Australian Company Number
- Australian Business Number (ABN)
- GST and other taxes
- An AUSkey: this is what you’ll use to manage your company’s online registration under its ABN.
Registration costs
An ABN registration is free of charge. A business name costs AU$36 for one year, or AU$84 for three years’ maintenance. As mentioned above, reserving a company name costs AU$70.
5. Set up a corporate bank account
Finally, your company will need a corporate bank account to handle financial transactions. Though requirements for opening a business account varies from bank to bank, general procedures are similar in all Australian banks.
For most banks, you can actually start the initial process online before heading to a branch office to complete the account creation process.
You’ll need to provide a set of personal and company-related documents to open a corporate account, in compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. This Act obliges all account holders and dignitaries to provide formal identification.
Documents typically requested by Australian banks include:
- full company name as registered with ASIC
- Australian Company Number
- Australian Business Number
- company’s place of business
- foreign tax residency information
- date and state of company registration
- full names of company directors.
Get started with the right support
In Australia, foreign investors can enjoy wide-ranging support from government agencies, and stable legal frameworks that enable them to begin operations quickly. According to the World Bank Group, Australia is one of the top countries in the world in terms of processing times for registering a business. Australia’s institutional transparency also offers clarity to business owners, so they understand and can comply with their obligations under local law.
In addition, Australia’s business environment houses top-quality legal and financial experts that can offer support to market entrants. Ensure you have a trusted legal partner in the process of setting up your business. With this support, you can enter this thriving market with confidence, and start your company off on the right foot.
