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7 Advantages to Registering as a Company in 2024

March 12, 2023
|
By
Eric Dickler

A company business structure is one of the most common structures for businesses. Though it's not always the greatest option for a business owner, a company structure certainly has its advantages.

Here are seven reasons why you should consider starting your new business as a company.

1. Easy set-up

While launching a business as a company is not as easy as doing it as a sole trader, it is still not a difficult process. It only takes a few steps to get there.

In a nutshell:

  • Register as a legal entity
  • Register your company name 
  • Apply for an Australian Business Number  
  • Establish governance rules for your business
  • Decide company officeholders
  • Determine share structure
  • Choose shareholders
  • Register for the proper taxes. Remember to use a registered tax agent. 

And that’s it. 

2. Companies have limited liability

One of the major advantages of this business structure is that it is considered a separate legal entity, which means it is completely separate from your personal assets. The firm entity is run by one or more directors and owned by its shareholders, hence the majority of the responsibility falls on the company itself.

This means that if the company faces legal action or financial difficulties, the liability is borne by it. The shareholders are only accountable for liabilities incurred by the company that correspond to their share percentage.

3. Companies are a more attractive investment option

A company-structured business is most often geared toward attracting more investors as they can clearly see the size of the company they are investing in and know how their money is being spent.

With the advantages of limited liability, this structure also becomes a low-risk investment, which is an attractive incentive for potential investors.

4. Companies are more tax-effective

As an individual managing a sole trader business, seeing your business expand is exciting. As a sole trader, after you pass the cutoff and enter the 45% tax bracket, you will notice that high tax rates take practically half of your income. This is one of the reasons to set up your business as a company. Companies are subject to a flat corporate tax rate of either 27.5% or 30%, depending on their income.

Therefore, this business structure would be a far more tax-effective alternative if you anticipate rapid growth and significant revenue for your business.

5. Companies have good flexibility for future growth

Since a company structure doesn't have an expiration date, it allows for future growth. This implies that it can keep producing wealth endlessly until it dissolves. It is, therefore, the best framework for a family-run business.

The future is limitless because this structure makes it simple to add owners and shareholders, allowing for indefinite growth. A company structure's adaptability allows for future business structure changes as well.

6. Companies can incentivise employees

The nature of a company structure makes it a much more appealing approach for a business owner. 

For instance, a sole proprietorship couldn't offer a share program, and any employee bonuses would be paid out of the owner's pocket. On the other hand, a company structure can provide staff incentives which is a terrific method to attract and keep high-performing teams.

An employee share program, bonuses for achieving specific goals, or incentives for exemplary performance are a few examples.

7. Companies are eligible for government grants & incentives

This type of business structure also gives you access to government grants and incentives.

The government's Research & Development Tax Incentive, which allows businesses to claim a refundable tax offset of up to 43.5%, is a nice illustration of this. The Innovation Incentive Concession is a more recent incentive that provides an equal tax offset to the investment made for early-stage innovation companies.

The availability of these grants and incentives also helps to attract investors to a company.

In conclusion, there are many significant advantages to starting a company. It's a must to seek the right advice to ensure that your business is structured in a way that provides the best financial future.

Need help setting up your company? SUM[B] experts can help. We’ll provide expert advice and guide you through setting up a company built for growth.

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