A company is a distinct entity, able to be prosecuted, sue or be sued. A company is a separate entity that is able to accrue and dispose of assets and liabilities.
A company must be incorporated under the Corporations Act 2001 as either a proprietary company (limited by shares or unlimited with share capital) or a public company (limited by shares or guarantee, unlimited with share capital or a no liability company). A proprietary company is limited to 50 non-employee shareholders and are less regulated than public companies. They are normally used for the purposes of operating smaller businesses.
Most public companies are floated on the stock exchange and, while subject to greater regulation, have the general ability to raise greater capital due to the public being able to invest a larger number of shares in the company. Companies are run by directors (either executive or non-executive) who report to the shareholders on profits and loss and are responsible for ensuring the company remains solvent and legally compliant. Directors may be prosecuted personally for failing to carry out their duties or taking action injurious to the company so it is imperative that they act in good faith at all times and seek sound legal advice.
Perpetual succession and limited liability are amongst the greatest benefits to operating with a company structure. There are also a variety of tax benefits, including the following:-
- superannuation contributions made by a company for employees may be claimed as a tax deduction
- companies may be eligible to make retirement payments to employed family members
- ability to take advantage of fringe benefits tax (FBT)
- the company tax rate is lower than the highest marginal tax rate for individuals
For more information on the benefits of operating an enterprise through a company structure, contact a Commercial Lawyer today. We can conduct a business health check-up to help you determine whether running your business through a company is the most tax effective and profitable approach.
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