A company is a legal entity separate from its shareholders, who are the owners. The Corporations Law, administered by the Australian Securities and Investments Commission (ASIC), provides companies with separate legal personalities upon registration, which affords them legal status to enter into contracts, etc. A company‘s operations are governed by its constitution to the extent that the rules are not inconsistent with the Corporations Law.
The Corporations Law provides for different types of company, such as:
- Companies limited by shares, the most popular type.
- Companies limited by guarantee, where the members guarantee to pay up to a stated amount in the event of winding up.
- No liability companies, in which the shareholders have no liability.
- Unlimited companies, where the liability of members is unlimited in the event of winding up.
Directors must be natural persons and at least one director should be an Australian resident.
A public officer must be appointed to satisfy taxation reporting requirements (often fulfilled by the company secretary). A company must apply to ASIC to be registered and be given an Australian Companies Number (ACN). A company must have a registered office in Australia with minimum prescribed office hours.
Taxation of companies - A company pays income tax on its taxable income. The tax rate is presently a flat 30 per cent with no tax-free threshold.
Branch of a foreign company - Foreign companies can operate branches in Australia, which are considered to be extensions of the foreign company. To find out more CLICK HERE.
To operate an Australian branch, a foreign company must register with ASIC. Registered foreign companies are provided with an Australian Registered Body Number (ARBN). Branch profits are subject to the normal rate of corporate tax. There is no separate branch profits tax.
Dividends
Generally a dividend can only be paid in the following circumstances (S254T):
- the company's assets exceed its liabilities immediately before the dividend is declared and the excess is sufficient for the payment of the dividend; and
- the payment of the dividend is fair and reasonable to the company's shareholders as a whole; and
- the payment of the dividend does not materially prejudice the company's ability to pay its creditors.
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All representations and information on this site is general in nature and should not be relied upon as advice. If you require specific advice please contact us.