A company is a type of business structure where the business is legally separate from its owner(s).
The company itself (not the person who owns the business) generally:
- owns the income the business earns
- is responsible for the business debts.
This is different from independent contractors who operate as sole traders, who personally own the business income and are personally liable for business debts.
A company structure may give you certain benefits, like protecting your personal assets if things go wrong.
A company:
- must have a nominated director to run the company
- can be owned by one or more people (or ‘shareholders’)
A person can be both a shareholder and a director of the company.
There are laws that apply to setting up and running a company. The laws are enforced by the Australian Securities & Investment Commission (ASIC).
Before setting up a company
There are some key things to consider before setting up a company, including:
| Benefits for a company structure | Things to think about |
|---|---|
| A company is legally responsible as a separate entity, so the personal assets of the shareholders are protected | The income earned is owned by the company, rather than the shareholders personally |
| It can be easier to attract investment and capital because of the limited liability for shareholders | Owners or shareholders don’t always make all the business decisions – other people under the company’s governance structure may make them |
| A company tax rate and taxation rules may be more favourable based on the revenue of the company | There are more reporting and compliance obligations and set up costs than there are for simpler business structures |
| A company structure may allow for faster and flexible business growth | The obligations and complexity of running a company may also increase. |
If you are unsure about whether setting up a company is right for you, you can access more information below or seek professional advice.
Transitioning from independent contractor to company
Toby was previously a graphic designer working as an independent contractor.
Since then, Toby has developed graphic design software that he wants to sell to other businesses. He plans to grow his business by selling the software for a licence fee.
Toby also wants to protect his personal assets in case things go wrong, and decides that the company structure is right for his business. Toby becomes both a shareholder and director of the company.
Toby’s company pays an accountant to help with the administration and obligations of the company.
Setting up a structure to support future growth
A media distribution company forms with the investment from other shareholders. In addition to their liability limited by shares, the investors see the potential for the types of media the company specialises in to create new audiences.
The investment means the company has the capital to work with different types of media businesses they may not have previously been able to reach.
The company sets up the required share register.
Considering the costs and benefits
Angie is a sculptor who sells her work in local galleries and at markets.
Angie considers whether a company structure is right for her. She learns that the set up and operating costs for running a company may not be the best fit for her level of income from her creative sculpting business.
Angie decides that continuing to work as an independent contractor is best for her now.
Registering a company
If you decide that a company structure is right for your creative business activity, you must register the company. When you register a company, you get an Australian Company Number (ACN).
Your company’s ACN
An ACN is 9-digit number that helps to identify your company to the government, the public and other businesses.
The ACN must appear on all company documents.
There are many things you need to have ready before registering a company. These include deciding on:
- a company name and seeing if it is available
- a registered and principal place of business address
- who the company office holders are
- the company share structure
- the shareholders or members of the company
- the rules and governance of the company.
There is a full list of steps to register a company on the Australian Securities and Investments Commission website.
There are fees for registering a company that you need to consider.
To make sure you get everything right when setting up a company, it can be helpful to get financial or legal advice.
Applying for a director ID
Before a person is appointed as a company director, they must apply for a director ID.
A director ID is also required for a person to be a director of:
- a registered Australian body (for example, a registered company)
- a registered foreign company
- an Aboriginal and Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006.
A director ID:
- is a number that identifies you as a company director
- helps prevent the false or fraudulent use of director identities.
A person only needs one director ID even if they are a director of more than one company.
You can apply for a director ID on the Australian Business Registry Services website.
There are many important legal obligations around director IDs. It is very important to understand these. Failure to meet these obligations can result in criminal penalties.
Reporting and notification requirements
Once you have registered your company, the company will need to regularly report and notify ASIC of certain things.
What your company is required to report on will depend on the type of company you have.
For example, a smaller private company will have fewer reporting obligations than a public company (a company that publicly sells shares).
Common reporting and notification requirements for private companies include:
- checking and responding to your company’s annual statement from ASIC
- passing a solvency resolution and paying annual fees
- notifying ASIC of certain changes to company details, including issuing shares.
Learn more about running a company on the ASIC website.
Hiring an agent to help
There are lots of legal obligations that apply to running a company, including lodging financial returns, record keeping, share registers and director duties.
Reporting and notification obligations can be time consuming. You can always appoint a registered agent to help you.
Registrations, taxes and insurance
Business registrations and taxes
There are many things that a company must register for (in addition to registering as a company).
Common registrations include:
- an Australian Business Number (ABN)
- a registered business or trading name
- licenses or permits needed for the services your company provides
- a domain name
- a trademark
- a company bank account
- registering for goods and services tax (GST)
- pay as you go withholding tax
- superannuation if you are engaging workers.
Learn more about business registrations and business taxes.
Business insurance
Your company is likely to need a range of insurances.
Some insurances are required by law. Others are recommended to help protect the business, company officeholders and members of the public.
Common insurances for companies include:
- director’s liability insurance
- product liability insurance
- public liability insurance
- workers compensation insurance
- other business insurance
Learn more about business insurance.
Keep learning:
Australian Securities and Investments Commission
Learn moreBusiness.gov
Learn moreAustralian Business Registry Services
Learn moreMore in this section:
Setting up as an independent contractor
There are lots of independent contractors in the creative industries. When you work as an independent contractor, you have your own business. This page has information to help you work out if it’s the right business structure for you and some basics on setting up.
Setting up or joining a co-operative
A co-operative is a business structure that exists to benefit its members. It can be a useful business structure to support creative professionals working in creative industries.
Registering your business
Most creative businesses need to be registered for different things so they can operate.
Business tax
Having some knowledge of how a business works with the tax system is important for any creative business – even if tax is usually something you’re not very interested in.
Business insurance
Business insurance can protect the business and the owner if things go wrong. Some insurances are required by law. Others can be a good idea.
Record keeping for businesses and organisations
Keeping the right business records will help you keep things on track and meet your business obligations.
Employee records
Businesses and organisations must keep employee records, including about working hours, pay, leave and super.
