An LLC or a limited liability company is a form of business organization with its roots in the American Corporate laws. As with most other legal subjects, corporate laws can be best understood when you speak to a business dispute lawyers or Business lawyers in Melbourne. An LLC bestows the protection of limited liability available to a corporation while the operational flexibility and tax efficiency are similar to that of a partnership. Owners of an LLC do not suffer tax as a distinct business entity and profits/losses transition to each member of an LLC with individual members reporting profit/loss in their personal tax returns similar to the owners of a partnership firm.
Obligations of an LLC do not transfer to the owners and therefore an LLC offers the best option for businesses seeking to transfer losses to its investors as complete protection against liability is available to all members of an LLC. In Australian parlance, an LLC is known as a Proprietary Limited Company or in some contexts as a Private proprietary company. A thorough understanding of the type of entity that you need to create and your obligations under that is absolutely essential for corporate compliance in the Australian jurisdiction. Therefore, it is a good idea to consult business lawyers in Melbourne or a business dispute lawyer before you put your first forward in this direction.
Australia is also renowned for its consistent economic growth that has remained positive for more than 26 years now with strong agricultural, mining, and service sectors. Proximity to affluent Asian markets, a highly innovative approach has created a powerful hub in the region for you to develop a wide range of businesses.
Requirements to start an LLC or a Proprietary Limited Company in Australia
The biggest benefit of an LLC in Australia is that the owner is not personally held liable for debt incurred by the company. The minimum requirements to start an LLC in Australia are:-
- 1 shareholder
- 1 company director
- No minimum share capital
- 1 resident director
With these requirements, an LLC is the best option available to foreigners interested in pursuing commercial activities on Australian soil. As an LLC you should submit financial statements on annual basis to designated authorities. However, if your sales are not expected to cross AU$75,000 in a financial year, you will not need a GST registration.
ASIC or the Australian Securities and Investments Commission and the Department of Industry Innovation and Science are invested with the responsibility of administering the process of company formation. Once you are ready to start an LLC in Australia, you need to follow the steps below.
Reserve your business/company name
A unique name is needed for all registered businesses in Australia. The name chosen by you should not be the same as any other business registered in Australia. Therefore, ideally, you should first check if the name chosen by you is not in conflict with any other registered name or pending trademarks. But, if you do not choose a company name while forming your company, the Company Number allotted to you by the Australian authorities will be your company name. Your company name should also clearly display the legal status such as ‘Pty’, ‘Proprietary’, ‘Proprietary Limited Company’ etc. Your business name however will not create a distinct entity and your business name will be your trading name.
Creating bylaws for the LLC
At this stage, you will need to create a draft of the bylaws that will govern your company and you can either choose replaceable rules as provided under the Corporations Act or create a constitution unique to your business. If you take the first option, you should define the replaceable rules and put your own rules alongside. However, when you are a single shareholder or a sole director, a formal system of internal governance is not essential.
Appoint statutory officeholders and a company director
There must be a legal representative for your business and such a person should be a resident of Australia and this person is generally appointed in the capacity of a company director. Each LLC or proprietary company should have a minimum of one such director. The company director’s responsibilities include overseeing the affairs of the business/company. Foreign companies can also appoint a nominee director who can be an external person but with the authority to make legally binding decisions on behalf of the company. Individuals appointed in this role are also responsible for ensuring that the company complies with all its obligations set out under the Corporations Act. At this stage you may want to find business lawyers in Melbourne or a business dispute lawyer to assist you with all aspects of the Australian law with regard to company incorporation, signing complex contracts, hiring staff, and even liquidation of a company.
Register your company
Your company can be registered digitally or through the usual paperwork. However, in certain instances, you may not be able to digitally register your company. Upon approval, you receive a Company number from Australian authorities. You are also given an ABN and a TFN which are generated automatically as well as a corporate key for you to update your company information securely.
Opening a corporate bank account
Once you are through with the registration of your company, you can proceed to open a corporate bank account. You should however know that bankers are governed by strict regulations to do due diligence with every applicant particularly with regard to counter-terrorism and money laundering. Your banker or your lawyer can advise you on the type of account best suited for your business. The bankers may require you to provide a wide range of documentation, information and details with regard to your company.
Starting a new business is relatively easy in Australia. But, you should explore your opportunities in-depth and make the right moves at the right time. Appropriate legal advice would always keep you in good stead and ensure that you comply with all the laws and regulations applicable to your business.