• Yes. A company can be established with just one person. 
• A company needs one director and one shareholder and the same person can fill both of these roles. 
• If you find yourself in this situation it may be worth considering whether operating as a sole trader could meet your long term business needs with a lower degree of complexity.
• If however you have any significant personal assets, operating as a company provides much better protection of those assets.

• This really depends on the type of company that you wish to register. 
• Some companies cannot operate using the replaceable rules. This includes:
• no liability companies; 
• public companies listed on the Australian Stock Exchange (ASX);  
• proprietary companies with a sole director and shareholder arrangement; and 
• any companies limited by guarantee without 'limited' in their name. 

• The tax imputation system effectively eliminates double taxation. 
• The tax office treats dividends as if they were normal income and groups them together with your other personal earnings to determine your annual income amount. 
• However you also receive an 'imputation credit' or 'franking credit’ that applies to the dividend amount. 
• This credit represents the tax paid by the company. When it is passed onto you as an investor it lets the tax office know that tax has already been paid on that particular amount. 
• This means that if your tax rate is 25% (from July 2021) you will not need to pay any tax on the dividend amount because the company has already paid it.
• If your tax rate is higher than the flat 25% (from July 2021) rate applied to some companies then you will only be taxed the difference between the 25% and your personal marginal amount.

• Normally your company comes into operation on the date of registration and continues until it is deregistered. 
• You can apply to have your company voluntarily deregistered providing that: 

1. the company is not carrying on a business;
2. its assets are less than $1,000;
3. all members (shareholders) have consented;
4. it is not currently party to any legal proceedings; and 
5. it has paid all fees and penalties required under the Corporations Act 2001 (Cth).

• Many different documents can make up the company's financial records. 
• Which of these records you are required to maintain will depend on the size of your company and the commercial enterprise you are carrying on. 
• Common financial documents can include:

1. the general ledger which records transactions, expenses, assets and liabilities;
2. cash records including bank statements, cheques and deposit books;
3. debtor and sales records;
4. wage and superannuation payment records;
5. delivery dockets, invoices and purchase orders;
6. tax returns and investment records;
7. contracts and other legal agreements.

• Generally yes but this really depends on the circumstances. 
• Small business is defined differently in different contexts and your business might be a small proprietary company for ASIC purposes but not a small business for tax (ATO) purposes. 
• For the purpose of regulating companies ASIC defines a small proprietary company as those which meet two of the following criteria:

1. annual revenue of less than $50 million;
2. fewer than 100 employees; and 
3. gross assets of less than $25 million. 

• The ATO defines a small business as having an annual revenue of less than $10 million.
• As a small business owner or the director of a company it is important to be aware of these different definitions and how they affect the level of regulation your business is subject to.
• We can help clarify the various classifications that apply to your business. 

• A company is an independent legal entity with its own rights and responsibilities. 
• Your company name gives you exclusive rights to that name in Australia.
• A business name is simply a name which a person or entity conducts its business under. It is not a legal entity and cannot be sue or be sued.
• The most effective way to protect your brand identity when you start a business is by registering a trade mark. A trade mark is legally enforceable and gives you rights to use, sell and license the name.

• Director duties are more commonly enforced through private law, for example by one director bringing legal proceedings against another for a breach.
• ASIC, which is responsible for policing deliberate breaches of director duties, rarely prosecutes directors for breaches of director’s duties.
• In theory there is a broad range of consequences which may apply in the event of a breach of duty by a director. These will usually depend on the severity of the breach. 
• For example the personal assets of a director may become accessible to creditors in an insolvency or litigation situation where the director is in breach.
• In some instances directors may also be fined and have damages awarded against them. 
• In extremely rare cases directors may face imprisonment.

• An ACN is issued by ASIC for identification of your company when it is undertaking business activities.
• An ABN is issued by the ATO and identifies the entity that is trading.
• An ACN or ABN must be shown on most company documents including invoices, cheques, letterheads, company notices, financial reports, handwritten receipts and more. It does not need to be shown on business cards, printed receipts, packaging and labels or advertisements.
• If a company is acting as a trustee it should show its ABN either in addition or separately.
• An ABN may also be held by businesses which are not a company, such as sole traders and partnerships.
• An ACN is always only held by a company.

• There are rules governing who can act as a director or secretary of a company. 
• Because these company officers have a duty to manage the company for the benefit of the shareholders there are certain standards that must be complied with. 
• Generally speaking you cannot be a director if you:
• are an undischarged bankrupt; 
• are subject to personal insolvency agreements; or 
• have been convicted of an offence such as fraud, theft, breach of director duties or insolvent trading. 
• Some exceptions may be made if you obtain court consent but this will only be in special circumstances. 

Question

I already operate a company and am considering starting up a new business that also operates as a company or a different business structure. I've been told that having a group of companies operating together can have a lot of advantages. Is this true?

Answer 

• It is true that operating multiple businesses as a group of companies can have several advantages. 
• This usually depends on what type of business you are operating, the size and the complexity of your company's operations.
•  The primary advantage of operating as a group is that losses from one company can be transferred to another. However there must be 100% common ownership and a parent-subsidiary relationship must exist. 
• For family businesses it can be advantageous to operate one business through a company and a second as a trust. This provides for the tax advantages of a company structure and the flexibility in distributions of a trust. 
• Your choices when combining structures are very wide and it is important to obtain advice from us on the most efficient way of mixing structures for maximum gain. 

Question

My partner and I want to start a catering business and we think a partnership or sole trader status might be for us to keep things simple. However it is just the two of us and we are worried about losing our home if something goes wrong. How can it be protected? What is the best way to set up our new business?

Answer 

• If something goes terribly wrong in your new business and you are sued, if you are operating as a sole trader or partnership your personal assets including your family home and vehicles are on the line.
• If however you have established the business as a trust or as a company, in most circumstances where you have acted in good faith you only stand to lose the assets that are owned by the company or trust.
• Generally a corporate (company) or trust structure is a lot better suited for personal asset protection than a sole trader or partnership arrangement.

Question

We are a family business and many members of our extended family are involved. We want to structure our company to avoid CGT impacts associated with holding and transferring shares. We would also like flexibility to distribute to different family members in different years depending in their individual tax situation. 

Answer 

• CGT implications will only come into play upon the sale of a CGT asset (the shares). 
• As such the importance of this issue is dependent on your long term intentions for the shares that you own. If you do not intend to sell them then CGT may not be a large consideration. 
• As for flexibility there are a number of flexible arrangements for operating a family business through a company structure to minimise taxes for the family group. 
• Some of these arrangements include combining different structures to make use of the advantages of each. 
• For example a family trust can be established and the trustee of the family trust could be the legal owner of the shares in the company. 
• This would allow for CGT sharing among the group and for flexible distributions of profits to be made among the family group at the discretion of the trustee. 
• How can I get financial support for my company?
• I know a company is right for my business but I'm not sure how to go about raising funds and getting investors to make it possible. How can I do this? 

Question

I know a company is right for my business but I'm not sure how to go about raising funds and getting investors to make it possible. How can I do this? 

Answer 

• Not all companies can raise funds from the general public by issuing shares.
• Only public companies with more than 50 non-employee shareholders can raise funds this way. 
• However private or 'proprietary limited' companies can raise funds either from existing shareholders and employees or from the public if that fundraising does not require a disclosure statement and the number of shareholders is quite limited. Whether this is the case is a complicated matter and we will need to advise you based on the particular circumstances of your case. 
• If you do decide to raise funds from the general public you must ensure that investors are given certain documents including but not limited to:

1. a prospectus; 
2. an offer information statement; and 
3. a profile statement. 

• You may need to engage a financial or business advisor to assist you with these documents.
• Many business owners will obtain finance from a bank using their personal assets as security and then seek out additional investors to make up the remaining amount.

Question

As part of my business model I'll be providing new LED lighting products to the public. They are a new technology and can save households a lot of money. However I've heard that there have been a lot of problems in the way these lights have been marketed by other companies. What should I watch out for?

Answer 

• One of the obligations of managing a company is to ensure that your company complies with all relevant laws. This includes the Australian Consumer Law. 
• There are specific laws against misleading or deceptive conduct in that legislation. These particularly concern making false claims about products. 
• When selling products you must ensure that the statements you make about the product performance and quality are not likely to mislead or deceive. There are significant penalties in place for companies who mislead or deceive. 
• You should also consider your business risk and long term customer base. If you make claims about a product that cannot be sustained it is unlikely that your business will grow. 

Question

I don't really understand the concept of a company being a separate legal entity. Does this mean I would lose control of the company?

Answer 

• After registration a company becomes a separate legal entity, like a person is a separate legal entity. 
•  Many of the same legal rights and obligations attach to the company as to a legal person. 
• This means the company can:

1. buy and sell property; 
2. enter into contracts;
3. litigate or be litigated against;
4. incur debts; and
5. pay employees. 

• However it is obvious that a company cannot do this by itself. There must be a person (the director) who can control and initiate these actions. A director therefore has control of the company.
• This is one of the main advantages of a company structure. A director can have control over the company and its day-to-day affairs without assuming the same degree of personal risk as in other business structures such as a partnership or business operations as a sole trader. If the business goes bad, the director who has complied with the law and acted in good faith will not lose her personal assets such as her house (unless she has provided a creditor with a ‘personal guarantee’ of the company’s debt.