Operating a business activity in Australia requires the operator to be registered with the Australian Federal Government (Australian Business Register) and to obtain and quote its Australian Business Number (ABN) in all its business dealings. There are a wide variety of legal forms that the business activity can take, including:
These can either be public or private (proprietary) companies. The different types of companies can be identified by reference Pty Limited (or Pty Ltd) for private companies and Limited (or Ltd) for public companies. These entities require share capital to be paid up, although not necessarily in the form of cash – these could be contributed by way of some other form of asset (such as inventory).
Both types of company must have a board of directors, of which at least one must be a permanent resident of Australia. Private companies may have as a minimum one director allowing for single person businesses to operate through a company. Details concerning the shareholders and directors of the company are contained in the company’s corporate register which is required to be kept up to date with changes in any details of the directors and shareholders (including personal addresses).
Both types of company continue into perpetuity and are considered a separate legal entity, capable of entering into legally binding contracts in their own name. Both types of company are governed by the Corporations Act, 2001 and are regulated by the Australian Securities and Investments Commission. The rules and regulations specific to each company are contained in their Constitution.
Partnerships are a much simpler structure and are formed when two or more individuals or entities come together to form a business venture. Partnerships are governed by the “Partnership Act” which is different in each Australian State and Territory. These Acts can be overruled by the partners if they enter into a formal written agreement (known as a partnership agreement). These partnership agreements operate in a similar fashion to the company’s constitution in that they provide the ground rules for the operation of the entity.
The life of a partnership will be determined by who the partners are and the terms of the partnership agreement. If the partners are all companies then the partnership could continue into perpetuity, however if one of the partners is an individual then the partnership will have a limited life, although it could be reconstituted with alternate partners.
Partnerships, unlike companies, are not seen as a separate legal entity that can enter into legally binding contracts but rather it is the partners that enter into each contract and are held accountable for the terms of that contract.
Limited liability partnerships are not widely used in Australia. They are similar to normal partnerships but are required to have at least one company as a partner.
A foreign company may operate in Australia through a branch operation rather than having to set up a separate entity. Foreign companies wishing to operate in Australia must register and obtain an Australian Registered Business Number (ARBN).
The foreign company is required to submit its audited financial statements to the Australian Securities and Investments Commission annually.
These are individuals carrying on a business in their own right. Apart from the requirement to obtain and quote their ABN there are no nation-wide regulations that apply to sole traders, however Australian States and Territories do have their own regulations pertaining to sole traders.
Subsidiaries are regarded as companies in their own right and are subject to the rules and regulations noted above, irrespective of whether they are subsidiaries of Australian or foreign companies. See Limited liability company above.
Joint ventures operate in a similar manner to partnerships. See Partnerships.
See Limited liability company above.
Trusts can be fixed or discretionary in nature. Fixed trusts usually involve the issue of units which can be bought and sold in the same manner as shares in a company. The entitlement to the income of the trust is in proportion to the units held in the trust.
Discretionary trusts, also known as family trusts, do not have any issued capital and the entitlements to the income of the trust cannot be traded. The entitlement to the income of the trust is determined annually at the discretion of the trustees.
Superannuation funds are also known as pension schemes or retirement schemes. Superannuation funds generally fall into two main types, the public offer fund and the Self-Managed Superannuation Fund (SMSF). Self-managed superannuation funds are private based retirement schemes where the administration and ongoing investment decisions are made directly by the members of the retirement fund. Self-managed superannuation funds can have a maximum of four (4) members.
Superannuation funds are subject to strict regulation under the Superannuation Industry (Supervision) Act 1993 and are administered by the Australian Prudential Regulation Authority and the Australian Taxation Office.