The Company I registered in about 45 minutes

I registered a company in about 45 minutes.

I am registered with a website that sets up companies –so I logged onto their website, input all the details required.  Then I triple-checked my answers (always important!), clicked lodge and paid with my credit card.

Then 20 minutes later I get an email that the company has been registered by ASIC (Australian Securities and Investments Commission – Australian regulator of companies).

 Why I setup a company

These reasons will be different for each person.

-          To separate business from personal

-          To look more professional, look more like a business

-          To allow more opportunity to plan tax

-          Imputation Credits

-          Limited Liability (reduce risk of being sued for all you have)

Companies pay tax at a 30% flat rate. The company keeps a track of all tax received/paid (called a franking account).  Companies can pay dividends if there are enough

For example Year 1 company earns 1,000 taxable income. Pays 300 tax after lodging tax return ( sometime in year 2).

Year 2 – the company might be able to pay a franked dividend of up to $1,000 to the shareholders.

 Reasons why a company might not be a good fit

-          If you expect to earn less than $80,000 profit. (you will pay 31.5% or less tax in your own name  anyway)

-          If you are just going to take all the money out anyway

-          If you can’t keep records (or pay somebody to do so)

-          To protect your asset from your spouse (family law court sees through Trusts and Companies, even if set up before you met your spouse).  If you want to protect your assets/income – try a pre nuptial agreement (or a post-nuptial agreement) instead.

-          Capital Gains (no 50% discount if assets held more than 1 year unlike individuals and trusts).

-          If you don’t want added complexity.

 Reasons not to bother set up a company

-          In whatever you do nobody will try to sue you AND

-          You will never be on higher than 30% tax rate

 What it costs to setup a company:

ASIC fee to setup a company $400

Company document provider $130+

Accountant $300+

 Minimum costs to run a company (see below for my various categories of companies)

Nothing (for example – only acts as trustee for a trust or super fund)

ASIC yearly fee: $212 ($40 if a Super Fund trustee)

 Dormant: (no income, minimal expenses)

Accountants cost to lodge nil tax return/form

Bank fees (if applicable)

 Business:

As above + accountants costs to lodge accounts/tax return

 Info needed to register a company

Registered Office Address

Principle Place of Business Address

Directors

Secretaries (if any)

 Shareholders

Details needed for any shareholders

Full Name

Residential Address

Shares Owned/Amount Paid, etc.

Extra Details needed for Directors/Secretaries

Date of Birth

Place of Birth

Obviously the above is all reasonably simple.

But you do need an accountant for all the other questions they ask you like:

-          Ultimate holding company

-          Types of shares?

-          Number of shares issued

-          Votes in a general meeting per share or per holding

-          If you sell your shares do you offer to current shareholders first?

If you are thinking of setting up an entity (e.g. company, trust or super fund) talk to an accountant first.

You might also talk to an accountant if you are thinking of buying a business.

If you are setting up your own business – it is a good idea to talk to the accountant as well – but they should pick it up when they prepare your tax return.

Posted in Business, Tax

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