FAQs
Company
Unlike sole traders and partnerships, a company is a separate and distinct legal entity. Companies are heavily regulated by the Australian Investment and Securities Commission (ASIC). Companies exist apart from their members and as a separate entity companies have the ability to sue and to be sued.
Advantages
- Existence of a company is not dependent on the continuing existence of its members.
- Limited liability. The liability of the members of a company can vary but in general a members liability for a company is limited to the extent of the capital that member has invested into the company.
- Company income tax rates, currently set at 30% can result in tax savings over partnerships and sole traders, where marginal rates of tax can climb up to 46.5%.
Disadvantages
- Set up costs are much higher for companies. This is due to the amount of extra regulation involved and the fact that companies are set up as distinct legal entities.
- Ongoing administration is required in the form of annual ASIC forms, not to mention the need to constantly report any changes in directors and members addresses and other such details.