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Insights

August 12, 2014

The Basics of Business Structuring - Company

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Jita Sarai

A company is an independent legal entity which has members commonly referred to as shareholders who own the business and it has directors who run the day to day business of the company. Profits are either shared out among the shareholders in the form of dividends or reinvested in the company. Directors can be asked to give personal guarantees to cover any debts incurred.

All companies in Australia are governed by the Australian Securities and Investments Commission (ASIC), which administers the Corporations Act 2001(Commonwealth) and other legislation. Public listed companies must also comply with the rules of the Australian Stock Exchange.

Advantages of companies:

  • Generally, shareholders can only lose the value of their shares and are not liable for the company’s debts (i.e. limited liability).
  • Legal arrangements are in the company’s name, not in the name of its directors and managers.
  • The company can trade anywhere in Australia.
  • The business structure ensures continuity of management and ownership in the event of the death or disability of key people (because company shares may be transferred).
  • The tax rate for companies is less than the highest rate for individuals.

It costs more generally however, it comes with significant advantages such as the protection of your personal assets. If you are unsure if this is the right business structure for your business, talk to us today and we’ll help you determine the best structure for your business.

We explore the last type of business structure commonly used in Australia – Trusts.

IMPORTANT INFORMATION: This blog has been prepared by Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licences (No. 233209), located at Level 3, 50-56 Sanders St, Upper Mt Gravatt Q 4122. The information and opinions contained in this fact sheet are general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals personal circumstances have been taken into consideration for the preparation of this material. Any individual making a decision to buy, sell or hold any particular financial product should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Pty. Ltd. recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this fact sheet can change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.

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