Company Business Structure Australia - Pros & Cons

In this video Dannie McKinnon from The Field Group Accounting will be talking about the Company business structure and why you might consider structuring your business as a Company.
A Company is a separate legal entity and can incur debt, sue and be sued. The Shareholders of a company are its owners and can limit their personal liability and are generally not responsible for the company debts.
A Company must have at least one Director. A Director is responsible for managing the company business activities and must comply with their legal obligations under the Corporations Act. To become a company, an entity must be incorporated under the Corporations Act and register with ASIC.
For small business owners, the added compliance and director responsibilities when trading as a company means there needs to be a strong reason for a company to be chosen as your business structure over a Sole trader or Partnership.
Any profits the company makes are the companies. This is great where the business is reinvesting the profits into plant and equipment or maybe the debtors of the business are increasing. However when the Directors and Shareholders use these funds for personal use, either acquiring personal assets, paying off personal debt or our least favourite, on personal expenses, this can create taxation issues whereby additional wages or Dividends are required to be paid to the Shareholders/Directors to move the funds from the company to the individuals who have used the funds.
Another reason a company may be used for a small business for commercial reasons. By this we mean, a company gives a business more status when dealing with other businesses or the government. It may be that for a government contract that the small business needs to be trading as a company.
Some other factors to consider when considering a company are
- Losses carry forward indefinitely, while ownership is the same.
- Losses can’t be distributed to shareholders
- Easy to sell and pass on ownership
- Once tax is paid on profits and cash flow allows, the company can declare and pay franked dividends to shareholders, in some cases leading to positive tax outcomes for shareholders. (election)
- Significant set up costs and additional annual reporting requirements are the downside.
To learn about the other business structures available in Australia watch our other videos below:
TRUST - • Trust Business Structu...
SOLE TRADER - • Sole Trader Business S...
PARTNERSHIP - • Partnership Business S...
For more information visit fieldgroup.com.au
This document contains general advice only and is prepared without taking into account your particular objectives, financial circumstances and needs. The information provided is not a substitute for legal, tax and financial product advice. Before making any decision based on this information, you should speak to a licensed financial advisor who should assess its relevance to your individual circumstances. While The Field Group believes the information is accurate, no warranty is given as to its accuracy and persons who rely on this information do so at their own risk. The information provided in this bulletin is not considered financial product advice for the purposes of the corporations Act 2001.

[@kerrystone3201]

Thank you, good info. I find the music a bit distracting though...

[@charlesmackatoni4910]

Cheers Mate, Great VidEO

[@HH-je3sh]

Thank you.

[@sanketsingh794]

Thanks for the informative video
Whats the setup cost on average?

[@Hoaidan2512]

this is very informative. Thanks, heaps!

[@Dillonpickle]

thank you

[@D1cko888]

I’m more confused than ever now. 🤦‍♂️
I thought it’d make sense to go to a company rather than sole trader, but now I’m not sure.

[@theedenofgod5194]

I feel I made the opposite mistake. I feel I should have done company and not sole trader. As a construction worker, I think I should have done company because there are many assets at a big liability running a construction business.

[@walterstevenson5026]

Very informative thank you.

[@Birch37]

Isn't 27.5% Company Tax a Flat rate on all nett profits? Individual tax rates are tiered.

[@ag4838]

Thanks very clear and informative

[@mob_pho]

legend

[@c.h.g302]

Hi
Can a foreigner incorporate a business in WA?

[@nurturechildcare9880]

Video is really easy to understand and full of information. Please also make video on mistakes, how they can be solved e.g. Changing of class and resolution of shares, or converting shares in larger or smaller number.

[@fieldgroupaccounting]

Thanks for the feedback and suggestions! We'll see what we can do

[@borangle8585]

Typo on 'Commercial' slide...

[@user-xj8jf1gr5p]

I want to know if your company or your clients/associates have any
projects/investment that need funding, we are offering COVID-19
funding of project/ grant

[@PWL104]

Lose the music - it's sooo annoying. Otherwise good advice!

[@OshoLee]

How can Australians tolerate the criminal taxation system is beyond me!

[@mikfax]

The ones that make the taxes also decide what is criminal so your point is beyond me!