If you are starting a new venture or looking to grow your business, you may be considering whether it is the right time to register a company. Setting up a company can be a relatively easy and stress-free experience that offers greater legal protection. By registering your company, your business can begin to operate effectively, and comply with Australian law.
Here are 5 benefits for registering your company
You can limit your personal liability
As a sole trader or partnership you are legally responsible for all aspects of your business, including any debts and losses. If you sell a defective product, make an error or suffer an injury during the course of your business, you will be personally liable. This can result in the loss of all your personal assets such as your car and home. A company is a separate legal entity and it is an easy way to protect your personal assets from your business actions.
Minimise your tax liability
In Australia, the current tax rate for companies and small business is lower than the highest tax rate for an individual. As a sole trader you are taxed at the same rate as an individual. If you are in a higher tax rate, registering your company may significantly reduce your tax burden. Companies and small business are also entitled to a range of tax deductions for advertising, education and training, and repairs and maintenance, that are not claimable by individuals.
Avoid conflict with your founders
Registering a company helps immensely when conflict arises between founders. When you register a company, the company owners are limited to the number of shares purchased. The owners will have a clear understanding that their investment in the company is determined by the number of shares they own and not by any pre-registration verbal or written promises.
Enhance your brand image and improve the relationships with your customers and suppliers
Think of the biggest brands in the world today; Google, Nike, Facebook. All are registered companies. Registering your company enhances the reputation and perception of your business. Accountability is also established through the structure of your company, as well as the regulations by ASIC.
Becoming a registered company is also important for any future dealings with third parties, as many businesses will only hire or engage with registered companies. With the parties entering into an agreement with the company instead of the owners.
Raise significant capital for your business
As a company, your ability to attract investors and raise money for your business will be easier. Registering your company gives you the ability to borrow and incur debt but more importantly, sell shares and raise equity capital. If you had any other business structure, then you would need to pay taxes on your personal income tax statement even if that money is staying in the business.
Raising money could be essential for the development and expansion of your business. It is also preferable for investors to invest in a registered company rather than a sole trader or partnership, mainly because they know that there is a formal structure in place to accept their investment.
At LawPath, we make company registration quick and easy, with a 100% online registration process. We also have a range of bundles and additional services to help protect your new company from the get go.
Ready to register? Contact a LawPath consultant on 1800LAWPATH to learn more about customising legal documents, obtaining a fixed-fee quote from our network of 600+ expert lawyers or any other legal needs.