In this article, we will advise you on the steps to be taken and costs involved to set up and to register a company. We will also give advice about your legal obligations as a company director and company officers.
Steps to incorporate a company:
There are a few things for you to consider before incorporating a company. This include whether a company is the right business structure, choosing a company name, decide how the company operate, understanding the legal obligation of a company and its officeholders, gathering consent of persons involved in the company before registering a company.
At this stage, you should make sure that you have fully understand what your legal obligations will be if you become a company officeholder. Once you register your company in Australia with the Australian Securities and Investments Commission (ASIC), your company can conduct business throughout Australia without the need to register in individual states and territories (s117 Corporations Act 2001). However please note that your registered business name would not be the same as registering a company. Registration or use of a business name does not create a legal entity (only when registering a company) or allow the use of privileges to which a company is entitled.
Reserving your company name:
It is common practice for someone to register their business as Pty Ltd. The word ‘Pty Ltd’ is the abbreviation of ‘Proprietary Limited’. This means that the liability of the company’s members is limited to the amount unpaid on their shares. A company would come into existence at the beginning of the day on which it is registered (s119 Corporations Act 2001) until it is deregistered (Chapter 5A Corporations Act 2001).
It is important to check your business name availability and to see whether your chosen business name has been previously registered. By doing so, you would need to check if your proposed business name is similar or identical to any other registered business or pending trademarks through the ‘check the IP Australia website’. This is because even if you reserve or register a name for your company, person or corporation with similar registered name may still take action against you. Therefore to prevent this, it is your responsibility to be aware of any problems that might arise for your business name to be similar or likely to confuse from names already registered elsewhere.
Please note it is not necessary for you to give your company a name. You can use your Australian Company Number (ACN) as the name of your company name instead (s118 Corporations Act 2001).
In addition, you can reserve your business name by using form 410. This is to make sure that another person would not take your intended business company name before you register its business name. Once the ASIC approve your company name, they will reserve the name for you for two months. You may however apply to extend the two-month period by lodging another application with a fee. The second application must be lodged before the first two-month reservation period has elapsed. However ASIC would not indefinitely reserve a company name if that prevents other people to use the company name legitimately.
Before you register a company, you can consult lawyers how you want your company to be internally governed. You will need to decide if you want your company to be governed under replaceable rules (s141 Corporations Act 2001), its own constitution or a combination of both (s135 and s136 Corporations Act 2001). Please note your proprietary company cannot be governed by replaceable rules if you are the only director and member of that company (s135 (1) Corporations Act 2001).
The difference between replaceable rules and company constitution is that replaceable rules are the basic rules to internally managing a company including the Corporations Act 20001 as replaceable rules. You may choose to use the replaceable rules for your internal governance. This means that your company would not need to have its own written constitution with the expenses of keeping the constitution up to date with the law even when the replaceable rules are amended. On the other hand, if you choose to have your own company constitution rather than using the replaceable rules.
You do not have to lodge your constitution when applying to register the company but to keep with the company’s records so it would be available if required. However the company’s constitution should be drawn up prior to the registration of the company. Such constitution would have the effect of contract between the company and each member, directors, company secretary and each other member in that company. You must provide an up to date copy of the Constitution (s139 Corporations Act 2001) to any other member who requests it within 7 days (reg 1.1.01 Corporations Act 2001).