Business in Australia
Structure of Business Entities
One can do business in Australia as a company, a trust, a partnership, a sole trader, or a joint venture. Businesses established outside of Australia intending to operate within the country must either establish a wholly or partially owned subsidiary company in Australia or register as a foreign entity conducting business in the country.
Incorporation
Foreign companies may register a new company to establish an Australian subsidiary. Previously, it was common to purchase a newly established shelf firm that was not yet operational. However, the use of shelf companies has considerably decreased over time due to the streamlined process of creating a new firm.
The Australian Securities and Investments Commission (ASIC) registration process is the formal way to establish businesses. A unique nine-digit Australian Company Number (ACN) is given to a company upon its incorporation in Australia. A company’s structure can be limited by shares, limited by guarantee, unlimited with share capital, or it can be a no-liability business, according to the Corporations Act of 2001. The latter is only relevant if the company’s exclusive objectives are mining or mining-related activities.
Companies limited by shares—which can be either proprietary or public companies—are the most common kind of business structure in Australia. Public companies can list on the ASX and participate in public fundraising events.
Proprietary Companies
Private businesses or subsidiaries of public companies often adopt proprietary company structures. The only restriction on a private company’s size is usually on the maximum number of shareholders it may have. Certain conditions must be met to classify a proprietary company as large or small. There can only be 50 non-employee shareholders in a proprietary company (not including CSF shareholders). Its name must also contain the terms “Proprietary Limited,” “Pty Limited,” or “Pty Ltd” if it is designated as a limited proprietary company. Furthermore, although having a secretary is optional, a proprietary company must have at least one Australian resident serving as a director.
Public Companies
Publicly traded companies with a share capital limitation are commonly chosen for substantial enterprises seeking investment funds. They can have an unlimited number of members/shareholders, the option to be listed on the ASX, and are mandated to maintain a minimum of three directors, with at least two residing in Australia. Additionally, they must include “Limited” or “Ltd” at the end of their name if they operate as limited public companies and have a company secretary who ordinarily resides in Australia.
Australian Branch
Establishing an Australian branch could be more advantageous than forming a subsidiary, especially when aiming to consolidate the company’s financial outcomes within the home country of the overseas entity and mitigate some administrative complexities associated with managing an additional distinct entity. Creating an Australian branch by a foreign company could result in establishing a permanent presence in Australia for tax considerations.
An Australian Registered Body Number (ARBN) is often assigned to a foreign corporation upon registration.
Representative Office
If a foreign company does not intend to conduct business in Australia, it might consider establishing a representative office in the country.
Company Names
ASIC maintains an official registry of company and business names in Australia. Specific limitations exist regarding the permissible content in a company name, including restricted words such as “building society,” “trust,” “university,” “chartered,” and others. Every company registered under the Corporations Act is eligible for an Australian Business Number (ABN) – a prerequisite for GST registration.
Registered Office
An Australian business needs to have an Australian registered office. A street address in Australia must serve as the registered office. A post office postal address will not satisfy the company’s obligation to keep a registered office.
Trusts
Trusts represent a prevalent business structure, frequently employed for property investments or aggregating funds from investors without direct involvement in daily fund operations. They offer “tax-flow through” advantages, whereby investors bear the tax burden instead of the trust. Essential to a trust is a trustee, holding legal ownership of trust assets for the benefit of beneficiaries (investors) and overseeing trust activities. The trustee is obligated to prioritize the beneficiaries’ best interests. Unlike corporations, trusts lack independent legal entity status, obliging them to contract through their trustee’s authorized capacity.