Business Entities – Company
The most popular entity for small business is a private company.
A private company need only have one director and one shareholder. A company is a separate legal entity from its shareholders and directors and is not subject to a time requirement, relative to being ‘wound up’, such as a discretionary trust. Company shareholders can decide whether the company will have a separate constitution or adopt what is known as the ‘replaceable rules’ that are specified in the Corporation’s Act.
Every company has to have a registered office. A private company’s registered office does not have to be open to the public. A private company only needs one shareholder and can have a maximum of 50 shareholders. Shareholders do not play any direct day-to-day role in the administration of the company, unless they are directors.
Each company has an Australian Company Number (ACN).
A company can be sued, can sue and has the power to operate virtually every type of business, unless prohibited by its own constitution.
The company is liable for the debts the company incurs and not the shareholders and directors, unless the shareholders and/or directors have given a personal guarantee to an external party for debts relating to the company. Directors can be liable if they have allowed the company to incur debts, whilst the company has been insolvent, or the company has not met its super guarantee charge liability, in full, by the due date. Directors will automatically become personally responsible for a penalty equal to the unpaid amount.
Directors can also be liable for payment of PAYG withholding tax that has been withheld from employees’ wages, if not paid to the ATO, as well as other company’s tax liabilities in certain circumstances.
If you would like to discuss any aspects of utilising a company within your business, please contact us.
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