Do you think it’s the perfect time to restructure your business in Australia to Proprietary Limited company (Pty Ltd)? Converting to a different business structure entails a great deal of research, financial investment, and planning. If you are considering going from being a sole trader to a Pty Ltd company, here are some tips to consider.
1. Compare the pros and cons of each business structure
As a sole trader, carefully weigh the advantages of forming a company against the costs related to the business restructuring. Especially if your business is service-based, changing your business structure can be very advantageous. For instance, a Pty Ltd can provide some form of liability protection to your personal assets that sole trading cannot. If the advantages outweigh the costs of the conversion, then go ahead with the restructuring of your business.
2. Consider the taxes
When computing the costs of forming a Proprietary Limited company, take into account the taxes you are required to pay. Corporations are often associated with the so-called double taxation wherein income is taxed twice (at the individual and corporate levels). Some business owners forego their shareholder dividend payments to avoid double taxation.
3. Do your paperwork
To set up a Pty Ltd, you need to register your company with Australian Securities and Investments Commission (ASIC) by filling out the Form 201 or the Application for Registration as an Australian Company and then mailing the accomplished form to ASIC.
If you are busy and barely have the time for paperwork, you can hire a private service provider (PSP) to take care of your company application for a fee. A PSP uses software that can directly access the systems of ASIC.
When your company has been registered, make sure that your company’s name is displayed where you conduct business, it’s open to the public, your CAN/ABN is included on any company documents, and your details are always updated.