A company is a completely separate legal entity, subject to different tax laws. The directors of the company control the day to day running and are responsible for keeping the company solvent, while the shareholders of the company are owners of the company which can also be directors, but don’t have to be. The person with the most shares generally controls the company. A majority shareholder can appoint a director to run the company. At the director’s discretion, shareholders can receive a share in the profits of the company; this is known as a dividend. The main features of the common type of companies are as follows:
1. Proprietary Limited Company
This is the most common type of company limited by shares in Australia. The liability of the shareholder in such a company to contribute towards the company’s liabilities on winding up is limited to the amount, if any, unpaid on the shares.
2. Superannuation Trustee Company
This type of proprietary company is registered through ASIC as a company whose sole purpose is to act as the Trustee of a Superannuation Fund and is not permitted to trade in any form. A reduced rate on the annual fee payable to ASIC is applicable to this type of company.
3. NSW Medical Practice Company
Registered with ASIC as a standard proprietary company, this company type comes with a constitution approved by the Australian Medical Association in order to trade as a medical practice in New South Wales. All Directors of the company must be Registered Medical Practitioners.
4. Company Title Property (Home Unit) Company
This type of company is registered to purchase property, with a constitution that contains relevant sections relating to specific aspects like the plans of the property, by-laws and lot entitlement tables. Notified to ASIC as a Special Purpose Company it attracts a reduced rate on the annual fee payable to ASIC.
5. Unlisted Public Company (Limited by Shares)
Available for companies which are looking to list on the Australian Stock Exchange in the future, this company incorporation must have at least three Directors, two of whom must reside in Australia.
6. Limited by Guarantee Company
The liability of members in such a company is limited to the amount which, under the constitution, the members have agreed to contribute in the event of the company being wound up. Guarantee companies are not often used as trading vehicles because of the lack of working capital, but have been used for social clubs and not-for-profit or charitable organizations. This type of incorporation enables the company to nominate an amount for which each member is liable (guarantee amount) and objects of the company can be included in the constitution if desired. Public Companies Limited by Guarantee can usually apply for taxation concessions through the Australian Taxation Office, such as Deductible Gift Recipient Status.
7. Other company types include:
– Solicitor company
– Dental company
– Shelf company