Business entities in Australia
Foreign entrepreneurs willing to setup a business in Australia commonly do so through the establishment of a limited liability company, locally known as a proprietary company. Occasionally, registering other types of entities can be an alternative strategy Healy Consultants will suggest, according to the business plan of our Client. When setting up a business in Australia, it is recommended (but not mandatory) to open a local corporate bank account in Australia. Please refer to this page for corporate banking in Australia.
The Australian Limited Liability Company (Private Proprietary Company)
- A limited liability company can be formed in Australia with only i) one shareholder ii) one director and iii) no minimum paid-up capital. Foreigners living outside of Australia are however required to appoint at least one director ordinarily residing in Australia. Healy Consultants can provide nominee services to assist our Clients to comply with this legal obligation;
- After securing its registration certificate (locally known as the Australian Business Number, ABN), the company must prepare financial statements every year. The company is however required to register and submit monthly GST reports only if its annual sales exceed AU$75,000 (approximately US$55,000);
- Best uses: The Australian proprietary company is usually used when a single entrepreneur or a group of businessmen who already knew each other well want to do business in Australia. Such business entity is adapted to form SMEs.
The Australian trading trust
- In Australia, it is possible to use a trust as an alternative to a company in order to trade with customers. In order to do so, the trustee(s) must register the trust with the Australia Companies Registrar and the tax authority I order to obtain an Australia Business Registration Number and a Tax File Number. The main requirement for acceptance is to appoint a resident either as i) trustee or (if all trustees are residing overseas) ii) a public officer. Healy Consultants will assist our Client to meet these requirements;
- The trading trust is usually structured as a tax transparent entity, not subject to corporate income tax in Australia as long as all income is passed through to the trust’s beneficiaries;
- Best uses: the trading trust is an interesting business vehicle for a family-owned business.
The Australian limited liability partnership
- The Australia Partnership Act of 1963 provides for the registration of limited partnerships, between i) general partners who are liable for the partnership’s activities on their personal assets and ii) limited partners who are only liable for their committed contribution at the formation of the partnership. At least one general partner must be residing in Australia;
- Partnerships are usually tax transparent, in the sense that the income derived through the partnership is not taxable at the “corporate” level but as personal business income of the partners themselves. The partnership however is still subject to standard GST and employer registrations;
- Best uses: due to the unlimited liability of the partners, a partnership is a good entity to raise corporate finance with banks, as it is considered as an entity less prone to credit risk, provided of course the general partners can provide evidence they have sufficient collateral for the requested loan.
The Australian Public Limited Company (Unlisted Public Company)
- Registration of a public company in Australia follows similar requirements and requirements to those applying to a proprietary company. The main differences are i) the need to appoint at least three directors, amongst whom two resident directors (instead of one) and ii) the obligation for the financial statements to get audited (while proprietary companies can benefit from the small business exemption;
- Best uses: The Australian public company is usually used by group of businessmen who do not knew each other well want to do business in Australia while making sure that the management represents all parties and the financial statements represent a fair summary of the company’s profits and losses. Such entity is also required before an eventual IPO on the Australian Stock Exchange.
The Australian branch
- Foreign corporations can register a local branch of their overseas company. The procedures to do so are easy to complete and only require i) appointment of a local agent allowed by the foreign company to accept services of process and notices on behalf of the foreign company and ii) a registered address in Australia. After its registration, the branch must submit annual financial statements with the Australian Companies Registrar (ASIC);
- Best uses: the main disadvantage of a branch compared to a subsidiary is that the overseas company is subject to unlimited liability for the activities (and losses) of its Australian branch. A branch is hence recommended only if the operations in Australia will be simple to manage from overseas and do not create any legal risk. Another advantage of the branch is to consolidate the financial results of the Group it belongs to.
The Australian Representative Office
- Where a foreign company does not intend to carry on business in Australia, it may seek to establish an Australian representative office. Such an office must however only engage in activities which will not amount to carrying on business, for example market research;
- Best uses: the representative office is an attractive business entity prior to first ventures in Australia, when our Client is not yet ready to start operations and does not need a local entity to make local sales, but still want to conduct survey or have a local presence in the country.
Comparison table of different types of business entities in Australia
|LLC||Trading trust||Limited Liability partnership||PLC||Branch||Representative Office|
|Also known as:||Proprietary||Trading trust||LLP||Public proprietary||Branch||RO|
|How long to set the business up?||1 week||3 weeks||1 week||2 weeks||2 weeks||2 weeks|
|How long to open company bank account?||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks|
|Minimum shareholders/partners?||1||1||2||1||Parent company||Parent Company|
|Wholly foreign owned?||Yes||Yes||Yes||Yes||Yes||Yes|
|Minimum share capital for foreigners?||AU$1||AU$1||AU$2||AU$1||None||None|
|Tax File Number required?||Yes||Yes||Yes||Yes||Yes||Yes|
|File annual tax return?||Yes||Yes||Yes||Yes||Yes||Yes|
|Corporate bank account options?||Westpac||ANZ New Zealand||Commonwealth Bank||Westpac||Standard Chartered||HSBC|
|Does our Client need to travel?||No||No||No||No||No||No|
|Minimum directors allowed?||1||1||2||3||1||1|
|Resident director/partner/representative required?||Yes, 1||No||Yes, 1||Yes, 2||Yes, 1||Yes, 1|
|Corporate shareholders allowed?||Yes||Yes||Yes||Yes||Yes||Yes|
|Individual shareholders allowed?||Yes||Yes||Yes||Yes||No||No|
|Australia standard corporate tax rate?||30%||None||None||30%||30%||None|
|Annual financial statements required?||Yes||Yes||Yes||Yes||Yes||Yes|
|Allowed to issue sales invoices in Australia?||Yes||Yes||Yes||Yes||Yes||No|
|Allowed to sign contracts with Australia entities?||Yes||Yes||Yes||Yes||Yes||No|
|Allowed to import and export goods?||Yes||Yes||Yes||Yes||Yes||No|
|Can rent an office in Australia?||Yes||Yes||Yes||Yes||Yes||Yes|
|Can buy Australia property?||Yes||Yes||Yes||Yes||Yes||No|
|Can own equity in other Australia companies?||Yes||Yes||Yes||Yes||Yes||No|
|Total Australia business setup costs in Yr. 1||AU$6,997||AU$18,976||AU$7,400||AU$7,997||AU$7,990||AU$6,900|
|Subsequent annual costs (excl. accounting and tax fees)||AU$2,103||AU$12,416||AU$5,100||AU$2,303||AU$2,735||AU$2,400|
|Sample engagement fee invoice|