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This article discusses the types ocorporate structure commonly used byoverseas companies setting up businessin Australia.

1. Types o companies in AustraliaCompanies are reglated in Astralia by statte and thegeneral law. The Corporations Act 2001 (Cth)(Corporations Act) allows or the registration o or typeso companies:

(a) A company limited by shares;

(b) A company limited by garantee;

(c) A company with nlimited liability; and

(d) A no liability company (typically sed or miningprposes).

When a company is registered nder the CorporationsAct it is atomatically registered as an Astraliancompany. This means that it can condct bsinessthroghot Astralia withot needing to register inindividal State and Territory jrisdictions.

The most common type o company is a company limitedby shares, which may be either a proprietary (private)company or a pblic company. A proprietary company ismost common becase it has the advantage o beingsimpler to manage and less expensive to administer.

2. Australian subsidiary company orbranch ofce o oreign companyForeign companies establishing a bsiness presence inAstralia sally:

(a) Establish or acqire an Astralian sbsidiary companyand carry on bsiness in the name o that Astraliancompany; or

(b) Establish a branch oce o a oreign company andcarry on bsiness in the name o that oreigncompany.

The decision on whether to establish a sbsidiary orbranch oce shold depend on not only legal ortaxation considerations, bt also commercialconsiderations.

Table 1 (see page 2) sets ot the main dierencesbetween establishing a company in Astralia and aoreign entity doing bsiness throgh a branch oceestablished in Astralia.

3. Limited liability o an Australiancompany

An Astralian companys liability to its creditors is limitedto the vale o its assets. I an Astralian company is notable to pay its debts in ll as and when they all de, (iebecome insolvent), its creditors may not be repaid all theirdebt.

Doing Business in Australia corporate structures

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Table 1 Key dierences in business structures

Issue Australian subsidiary Branch ofce

Corporate law issues Separate legal entity. Company may be a privateor pblic company - sally private company

Registered with the Astralian Secrities &Investments Commission (ASIC) and given aniqe identiying nmber, an AstralianCompany Nmber (ACN)

Liabilities remain with the sbsidiary nless parent

company has provided a garantee or sbsidiaryhas been trading whilst insolvent

Not a separate legal entity

Foreign company is registered with the ASICand given a niqe identiying nmber, anAstralian Registered Bsiness Nmber(ARBN)

Liabilities are those o the oreign company

Foreign InvestmentReview Board

Approval may be reqired beore sbsidiary isacqired or established

Approval may be reqired beore assets orshares over A$100m or certain land can beacqired

Taxation Will be a resident or Astralian tax prposes

Will be taxed on all wordwide income whereversorced

Presently tax on all prots at the rate o 30%

Mst apply or Astralian Bsiness Nmber (ABN),

Tax File Nmber (TFN) and may need to beregistered or the Goods and Services Tax (GST)

Doble tax agreement may apply. Taxed asi it were a separate entity in Astralia.

Taxed on prots attribtable to an Astralianpermanent establishment

Presently tax on all prots at the rate o 30%

Mst apply or Astralian Bsiness Nmber(ABN), Tax File Nmber (TFN).

Debt/Equity I nded by debt owed to a oreign parent, theratio o debt to eqity cannot exceed 3:1 toqaliy or tax dedctions or interest paid toparent

I nded by debt owed to a oreign parent,the ratio o debt to eqity cannot exceed 3:1to qaliy or tax dedctions or interest paidto parent

Ongoingadministrative andreporting ormalities

Mst lodge annal retrns and annal nancialinormation i the company is not a smallproprietary company

Mst lodge annal retrns and nancial andother corporate inormation with the ASIC

Exchange controls Signicant cash transactions to be reported Signicant cash transactions to be reported

4. Proprietary company limited by sharesA proprietary company is a private company designed ora relatively small grop o shareholders or a single parentcompany shareholder. It cannot have more than 50non-employee shareholders and cannot invite the pblic tosbscribe or shares.

Each shareholder contribtes capital to the company bysbscribing and paying or shares. There are no minimmcapital reqirements. The paid p capital can be as littleas A$1.00.

Each shareholders liability is limited to any amont npaid

on shares held by that shareholder. I, or example, thereis a single shareholder who pays A$1.00 or 1 share, thenthat shareholder has no rther liability to the company.

A small proprietary company has less oneros ongoingadministrative obligations and is sitable or a oreigncompany wanting a separate presence in Astralia. This

type o company can be sed or each o the companies

in a grop strctre.

A proprietary company is a small proprietary companyor a nancial year i it satises at least two o theollowing paragraphs:

(a) the consolidated revene or the nancial year o thecompany and the entities it controls (i any) is less thanA$25 million;

(b) the vale o the consolidated gross assets at the endo the nancial year o the company and the entities itcontrols (i any) is less than $12.5 million;

(c) the company and the entities it controls (i any) have

ewer than 50, employees at the end o the nancialyear.

Registration o a proprietary company is simple and qick.The reqirements or registration are:

(a) A company name.

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(b) A registered oce within Astralia where allcommnications and notices may be sent.

(c) Directors - there can be any nmber o directors(inclding oreign directors) bt there mst be at leastone director who is ordinarily resident in Astralia.Each director mst have consented to act as directorand be over the age o 18 years.

(d) A company secretary - there mst be at least one personordinarily resident in Astralian to act as companysecretary. The secretary mst have consented to act assecretary and be a person over the age o 18 years.

(e) At least one shareholder, bt no more than 50non-employee shareholders, who has consented to bea shareholder.

() The nmber o shares to be issed on registration andthe amont o capital to be sbscribed by the initialshareholder or shareholders. As advised, there is nominimm capital reqirement.

(g) Registration can occr within 24 hors o thisinormation being available and each company costsabot A$1,200 (inclsive o government charges).

5. Foreign corporation carrying onbusiness through a branch ofceA oreign corporation carrying on bsiness throgh abranch oce mst register as a oreign company with theASIC. The registration reqirements are:

(a) The companys name mst be available to registration.

(b) Complete and lodge the relevant application orm anddocments, inclding a certied copy o the companyscerticate o incorporation (or a docment o similareect), constittion and nancial statements.

(c) Have a registered oce in Astralia.

(d) Appoint a local agent to represent the company inmaking sre it complies with its legislativereqirements in Astralia.

6. Other business vehicle structures6.1 Partnerships

A partnership in Astralia is the relationship which existsbetween persons carrying on bsiness in common with aview to prot. Partnerships are reglated by State stattesand the general law o contract, agency and trst law,

A partnership is not a separate legal entity:(a) Each partner is the agent o the other partner and may

make contracts, ndertake obligations and dispose opartnership property on behal o he partnership in theordinary corse o the partnership bsiness.

(b) Each partner is personally liable, jointly and severally

or the liabilities o the partnership and or themiscondct o other partners in the corse o thepartnership bsiness.

(c) The liability o each partner is nlimited except in thecase o limited partnerships.

(d) The property o the partnership is owned by thepartners personally.

(e) The partnership mst sbmit an annal tax retrndisclosing its income, otgoings and distribtion oprots to partners althogh it is the partners

individally who mst pay tax on their share opartnership prots and not the partnership as a whole.

() I the partnership carries on bsiness other than nderthe names o the partners, the bsiness name mst beregistered in each relevant State and Territory.

A orm o limited partnership may be ormed, althogh itis ncommon. A limited partnership mst have at leastone limited partner (a partner whose liability is limited)and one general partner (a partner whose liability isnlimited). A limited partnership is taxed as a companyand is not a common strctre.

Partnerships can be created by either a ormal agreement(partnership deed/agreement) or by condct. There is noormal registration reqirement. Partnerships have a greatdeal o fexibility and oer condentiality, as they are notreqired to make pblic disclosres.

6.2 Joint Ventures

Yo may participate in joint ventres with other Astralianbsinesses to carry ot commercial activities. Joint ventresare primarily sed on a project by project basis rather thanto carry on continos bsiness. The joint ventre will begoverned by the terms o the joint ventre agreement betweenthe parties as well as by common law and contract law.

Like a partnership, each joint ventrer is taxed separately.Bt, nlike a partnership:

(a) A joint ventre is not carried ot with a view to prot,rather the intention o the joint ventre is typically to sharethe prodct or otpt o the ventre or to share costs.

(b) Joint ventrers are not agents and are not liable orthe acts o the other joint ventrers.

6.3 Registration, licenses and permits

Apart rom the sal tax registrations applicable to alltrading companies, namely:

(a) An Astralian Bsiness Nmber (ABN).

(b) An Astralian Tax File Nmber (TFN).

(c) Goods and Services Tax (GST) registration,

there are no specic registrations, licences or permits thatare reqired to establish a company.

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