What is a company?

A company is a type of business structure that is a legal entity in its own right. The owners are the shareholders and the company can enter contracts, be sued (or sue), buy and sell assets.

There are two types of companies

Proprietary limited companies:

are unlisted, restricted from raising capital from the public through company shares. This limits unwanted people from becoming shareholders/owners in the company.

Public companies:

have the option to be listed or unlisted but are entitled to raise/borrow money from the public via listing company shares.

Key advantages of choosing a company structure:

The limited liability nature of a company. Shareholders aren’t normally liable for debts.

– Capital is normally easier to raise.

– Companies face a lower tax rate than the top marginal rate for individuals.

– Some companies prefer to only deal with suppliers who operate as a company.

Key drawbacks can include:

– Higher setup costs

– Greater ongoing compliance costs

– More complex reporting obligations

– The requirement for separate company and personal records

– As companies are governed by the Corporations Act, there are strict rules in regard to how a  company and its officers should behave.

It is important to understand the differences in business structures when researching your options. We advise you to seek legal or other professional advice before deciding on the best structure for you.

If you're ready to take the next steps with your business, start comparing business loans and business credit cards with InfoChoice today.

Next Steps:
Register an Australian Business Name

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