When it comes to running a business, the personal assets of sole traders aren’t protected.

This is a major disadvantage if anything goes wrong.

It’s a big reason why so many Australians choose to set up their own company, which exists as a separate legal entity from its owners. 

The company shoulders liability in the face of financial or legal difficulties. This low-risk investment is also a more tax-friendly option, with good flexibility for growth in the future.

Have you decided that a company structure is right for your needs? This tool can help you to figure that out.

Setting up a company isn’t complicated, although some planning is required. You can handle the entire process yourself by following the steps in this guide, or hire a private service provider like an accountant or solicitor to help you.

Keep reading to find out what’s involved with setting up a company in Australia.

Set up a company in six steps:

1. Choose a company name and register it

First, what is the legal status of your company? This status must be included at the end of your company name.

Here are the most popular options:

• Proprietary Limited (Pty Ltd): this is used the most by Australian companies that contain no more than 50 non-employee shareholders. 
• Limited (Ltd): a public company that may or may not be listed on the Australian Stock Exchange (ASX).
• No Liability (NL): a public company specifically for the Australian mining industry, may or may not be listed on the ASX.

A few rules to consider:

• Don’t choose a name that’s already been registered for an existing company anywhere in Australia (check name availability and existing trademarks to be sure, as this is your responsibility alone).
• If you want to include words such as “bank”, “trust”, “Royal” and “Incorporated” you will need approval from a government minister.
• Read more about the rules for choosing a company name (including restricted terms, approved characters and approved abbreviations).

Don’t panic if you haven’t decided on a name yet, you can always apply to reserve it for two months (nobody else can use it while you consider your options).

Please note: It isn’t enough to register a business name and call it a day. You still need to register your company as a legal entity (this is a separate process – see step 4). 

2. Decide on company governance (the internal rules for your company)

How will your company be governed? There are three options:

• Replaceable rules: basic rules for managing your company, replacing the need for a written constitution (you don’t have to pay for updates when the law changes).
• Own constitution: a copy of the constitution must be kept in your records and updated if there are changes to the law.
• A combination of both (replaceable rules AND own constitution)

Read this document to help you decide which governance structure is best suited to your company.

3. Set up officeholders for your company

Officeholders need to make sure the company follows the law (under the Corporations Act). Their responsibilities include keeping current records of company details and paying any required fees.

Please choose these representatives well, because ASIC can take formal action against companies that don’t comply with legislation. 

Keep in mind the director and secretary must be over 18 years of age. If you’re operating a proprietary company, at least one director and secretary is required to ordinarily live in Australia. For public companies, a minimum of two directors must normally reside here. 

Before you register the company, you’ll need the written consent of:

• All officeholders: directors, secretaries and at least one member (also known as a shareholder)
• The owner of your registered office address 

4. Register as a legal entity with ASIC

You’ll need to register your company with the Australian Securities and Investments Commission (ASIC). This enables you to run your business in any Australian state or territory, without having to lodge separate registrations for different jurisdictions (though you initially choose a state or territory to register in). 

You’re looking at costs ranging from $422 to $512 for the initial registration fee. There’s also a yearly fee, but ASIC will let you know when that is expected.

To make life easier, you can register your company online via the Australian government’s Business Registration Service (BRS). Alternatively, a private service provider can handle the registration for you, but keep in mind they normally charge a higher fee than ASIC. 

Please note that online registration isn’t available for some company types, such as those with unlimited liability (more examples here). In such cases, you can submit a request to register the traditional way (by filling out a paper form).

5. Determine share structure and set up a share register

Will your company have share capital?

If so, you need to choose your shareholders and determine:

• quantity of shares that each individual will own
• class of shares that each individual will own

It’s also crucial that you maintain a record of all shares that are supplied by your company. This record is generally filled with the latest data about your company shares, as well as your shareholders’ personal information and holdings.

There’s more information about setting up a shares register here.

6. Apply for an ABN

After your application has been approved, you’ll receive a certificate of registration and Australian Company Number (ACN). 

The final step: 

Use your ACN to apply for an Australian Business Number (ABN). This unique eleven-digit ABN is required to officially identify your business, and differentiate it from those with similar names.

You’ll also receive a unique number (corporate key) that allows you to create an online account, in case you want to update any personal details in the future.

Do you need help setting up a company in Australia?

The Xperion accounting team loves handling the boring details of registering a company. We’ve been helping business owners and budding entrepreneurs for decades, so we can make this really easy for you. Contact our team for a free no-obligation consultation.