If you operate your business as an incorporated company, the business is a distinct legal entity that is regulated by the Australian Securities and Investment Commission (ASIC).A company is a more complex business structure. A company must hold an ABN number and Tax File Number.
Ownership Structure: 1 to 50 shareholders; Shareholders share profit based on share portion; Shareholders responsible for electing Directors. Control and Management: Directors responsible. Risk and Legal Liability: Limited Liability - Shareholders are not liable for the debts of the business. Personal assets are protected. Taxation: Pays tax on its net profit at a flat rate of 30%; No Capital Gain Tax benefit. Company loans to shareholders carry risk: Loans from a company to shareholders without proper structuring are regarded as tax avoidance under Division 7 of the Tax Act. They carry significant penalties and advice should always be sought from tax accountant. Compliance and Legal: Regulatory authorities closely monitor; Severe penalties apply for breaching the Corporations Law. Paying superannuation: Company must make superannuation contributions for any eligible workers it employs, including you as a company director. Business Wind Up or Sale: Company continues as a legal entity in the event of the death, retirement, bankruptcy of the owner or change in shareholders; Company can be sold (capital gains tax applies to the sale of companies).
