New year, new company! If you're reading this, you've probably decided to make the big leap towards starting your company but have the daunting “what now?” question at the back of your mind. Congratulations! You’re in the right place. Here are some of the most important things to prepare for when starting your own company.
1. Limited or unlimited
Most small business owners usually opt for a company structure known as a proprietary company. These companies may be ‘limited by shares’ or ‘unlimited with a share capital’.
Contrary to a public company, proprietary limited companies don’t usually sell their shares to the public for funding capital to operate the business. Also, the personal liability of every shareholder will depend on the share amount they agreed to pay for—meaning limited liability.
Unlimited, on the other hand, has no limit on personal liability. They could be liable for the company's debts even if their shares are already paid in full.
2. Decide on corporate governance
Every successful entity needs a balance between creativity and constraint. That is why deciding how your company will implement rules, practices, and processes to direct and manage internal affairs is very important.
Your company may apply the basic set of rules known as the replaceable rules provided by the Corporations Act 2001 for internal company management.
You may also create your own constitution or adopt a combination of your own and the replaceable rules.
Note – In a proprietary company with a single member who also stands as the sole director, having formal rules to govern internal relationships is unnecessary.
3. Choose a company name
First impressions last. Your company name is most likely the first component of your brand that the customers will come across. That’s why the company name you need to choose should be unique, authentic to your brand, and memorable—to resonate with your target consumers.
It’s important to know that besides choosing your company name, you may also be known by your company’s Australian Company Number (ACN).
Important rules for the name a company can use:
The company's name must include its legal status – whether public or proprietary company and if shareholders have limited or unlimited liability (e.g. for proprietary limited companies: Shelby Company Pty. Ltd.)
The name must be unique. You can’t choose a name already registered and cannot include some words, phrases or symbols, mandated by the Australian Securities & Investment Commission (ASIC).
Proprietary unlimited companies’ names can only have the word ‘proprietary’ at the end.
Remember, registering your business name is not the same as registering your company and the benefits that come with it.
4. Register office and business addresses
Another critical requirement when starting a company is a registered office address and a principal place of business address. The former must be an address within Australia where all communications and notices to the company will be dropped off, while the latter is the address where the company mainly conducts its business.
The registered office and principal place of business address can’t be a post office box address.
5. Appoint company officeholders
The officeholders of a company are the directors and secretaries appointed. The legal obligation of an officeholder is to ensure that the company acts in accordance with the law.
A proprietary company needs at least one director who lives in Australia, but you can appoint more than one if deemed necessary. As required by the law, directors are to apply for a director identification number.
On the other hand, a secretary is not mandatory, but you may also appoint one or more if necessary.
Both directors and secretaries appointed as officeholders must be over 18 years old. They must also sign a written consent that they have officially agreed to be a director, secretary, and/or member.
Still a bit lost? Don't stress, we can do a complete company setup for you!
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