Start on the right foot. 7 things to know when setting up a new company.
Starting your own company is an exciting time. It’s likely to be one of the more pivotal moments in your career, if not your entire life. But it’s also a time inevitably filled with processes, responsibilities and pitfalls. The good news is with a little planning and a trusted support team around you, you can significantly smooth the process. While there are many things you’ll need to consider when starting out, here are seven of the most common – and important.
1. Is a company right for you?
The very first thing you need to ask is if a company structure actually suits your business needs and vision. While it can undoubtedly bring advantages, a company also brings a range of up-front and ongoing responsibilities. For one thing, a company is a legal entity which is regulated by the Australian Securities and Investments Commission (ASIC). It typically has higher set-up and administration costs due to the additional reporting requirements. While run by directors, it’s ultimately owned by shareholders. If you have any questions about the structure or responsibilities associated with starting your company, it’s very important to seek the advice of a solicitor or another qualified business professional before you travel too far down the road.
2. What will your company be called?
You may already have a name in mind. Or perhaps you’re still thinking about it. Either way, be aware that when you set up your company the name must show its legal status. For example, a propriety – i.e. privately held – company must have the word ‘proprietary’ or the abbreviation ‘Pty’ in the name and it must show the liability of the members. Another important step is to ensure the name you want isn’t already owned by someone else (it’s amazing how many are). It only takes a few minutes to do this with the free name checker tool on the ASIC website.
3. How will your company be governed?
Another big decision is to determine how you want your company to be governed. As part of this you’ll need to decide if you want to use ‘replaceable rules’ under the provisions of the Corporations Act 2001. Alternatively you may prefer to use the company’s own constitution, or even a combination of both. The company constitution must be kept in your company records. For more information about internal governance of requirements visit the ASIC website here.
4. What are your obligations as an officeholder?
As director or secretary of the company, you’ll need to comply with the requirements of the Corporations Act 2001. This can be a significant commitment, so well before you register your company the onus is squarely on you to be aware of your obligations. Ultimately, you’ll be held responsible for the company’s compliance, or lack thereof.
5. Have you obtained formal consent?
Before you can formally register your company, you’ll need to get written consent from a director, secretary and member. Each of these roles must be filled by a person over 18 years old. If you’re setting up a proprietary company you won’t need a secretary, but you must still have at least one director. If your registered office won’t actually be occupied by your company, you’ll also need to get written consent from the occupier allowing your company to use their address.
6. How will you formally register your company?
You’ve done your due diligence and you’re ready to register your company. Generally speaking there are two ways to do it. You can engage a specialist business service provider to manage the registration of your behalf. Or you may prefer to do it yourself, using the forms available on the ASIC website. While certainly cheaper it’s worth remembering the second option will require far more of your time and energy.
7. What are your legal obligations?
Last but certainly not least, when setting up your company there are many legal obligations – and it’s your responsibility to be aware of them all. While some can be quite complex, others are more straight forward. For example, your company name must be clearly and publicly displayed everywhere your company does business. You’ll also be provided with an Australian Customer Number (ACN) which must legally appear on a number of formal documents.
Like to know more? The Starting a Company section of the ASIC website is an excellent source of additional information.
Lewis Insurance Services is here to help our clients with advice on the appropriate insurance for your business needs. To discuss further, please contact Lewis Insurance Services on 07 3217 9015 or send us an email by clicking here.
This article was published by our AFSL Licensee, Insurance Advisernet Australia P/L (18/08/2017)
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