In Australia, companies are one of the main business structures. In contrast to sole traders and partnerships, companies are their own separate legal entity. This means that directors are not legally liable for debts or legal actions (except in special circumstances). The past five years have seen a number of economic events unfold which have affected the business landscape, including the COVID-19 induced recession. Here we will explain the key findings of company registration data from 2016-2020 and the key elements of company registrations in Australia.
Key points
- As at February 2021, there are 2,846,916 active companies in Australia
- 23,212 were registered throughout February 2021 alone
- There were 2,663,317 active companies in Australia in February 2020
- Companies remain a popular business structure, as opposed to 687,571 sole traders and 240,016 partnerships operating in Australia
Registering a company in Australia
Benefits
Companies remain one of the most prominent business structures in Australia. Registering a company will define your business as a separate legal entity and also offer the following benefits:
- Lower tax rates (in comparison to individual income tax rates)
- No legal liability for company owners
- Ownership through shares
By contrast, sole traders and partnerships are taxed on their individual income and this can become costly if your business is earning a decent profit. Partners and sole traders are also directly responsible for their debts and legal obligations. If you’re looking to register a company, check out our interactive online company registration form, which comes equipped with a suite of legal documents.
Company officeholders
A company officeholder is responsible for many aspects of running a company. The Corporations Act 2001 (Cth) states that all directors and secretaries of a company are company officers. Company officers are people who wield significant influence over the company. They also include the CEO, COO, CFO. Receivers, administrators, liquidators and trustees are also company officers.
Directors and secretaries
- Pty Ltd companies are legally required to have at least 1 director
- Public companies need to have at least 3 directors
- Public companies also need to have at least 1 secretary
Duties and obligations
Company directors need to act with care and diligence, act in good faith, properly use their position and properly use information. Further, company secretaries need to:
- Advise board of directors on legal rules
- Check that companies follow the rules
- Coordinate dispatch of board and also committee papers
- Keep track of minutes for meetings
A company secretary can be held personally accountable if they breach laws in the same way that directors are.
2021 changes to company laws
In early 2020, the Federal Government temporarily made changes to insolvent trading laws. This mainly involved abolishing the offence of directors’ allowing their companies to trade whilst insolvent. From January 1, 2021 this law expired meaning that it is once again an offence for a company to trade whilst insolvent.
Other interesting company statistics
- June marks the end of the financial year in Australia, and consequently is the most popular month for registering a company.
- We’ve seen dramatic increases in company registrations in Australia over the past 2 decades. This is no doubt a result of better accessibility to information and also more streamlined registration services.
- Victoria is leading the way in terms of new registrations and company registrations per capita.
