I recently received this article by East Sydney based law firm, The Fold, posted on 23 September this year. It provides an excellent overview of company structures and how to determine what structure best fits your business. When you’re in start-up phase, there are millions of business decisions to make. One of the most important decisions is your business structure. Many people choose to use a company structure as opposed to other things like partnerships or sole trader because of the taxation benefits and the ability to limit their liability. Companies also offer flexibility when it comes to transferring your interest in the business and allows the people managing the business (directors) to be different to the stakeholders (shareholders). Assuming you have decided to use a company, it is important to work out which type will suit your business now and into the future. In Australia, there are 3 different types of companies:
- Proprietary limited (pty ltd) – also known as private companies;
- Public (ltd); and
- No liability (NL).
Different rules apply to each. So, here’s an overview of the key features to help you decide which one fits. Public companies can be converted to proprietary limited companies and vice versa, but getting the approvals can be painful! So it’s best to choose the right company type from the start! Proprietary limited companies are simple to set up – use a company incorporation website like Cleardocs. Public companies and companies limited by guarantee are more complicated and you may need help with the Constitution – so think about using a lawyer for these structures. Consult an experienced business advisor, accountant or solicitor for further information.
