Australia is a common law jurisdiction.
Business vehicles for enterprises in Australia
You can conduct business in Australia through any of the following structures:
- Joint venture; or
- Sole trader.
There are four types of companies:
- A company limited by shares (public and proprietary).
- A company limited by guarantee (not-for-profits, for example).
- An unlimited company (public and proprietary).
- A no liability company (limited to mining).
The type of company to register depends on the nature of your business or activity.
However, 98% of companies in Australia are either public (“Ltd”) or proprietary companies limited by shares (what we usually call ‘Pty Ltd’).
Members (shareholders) of a company limited by shares contribute capital by paying for shares in that company, and their liability is limited to the paid amount on those shares.
Proprietary companies are the most common because they have simple and cost-effective administration requirements.
A proprietary company (small or large) is a private company that can have a maximum of 50 non-employee shareholders.
A proprietary company can place restrictions on the transfer of its shares (usually on the Constitution and/or Shareholders’ Agreement).
A public company can have a much larger number of shareholders because is not subject to those restrictions.
Establishing a business presence from overseas
The most common options for foreign companies establishing a business presence in Australia are:
- Establishing or acquiring an Australian subsidiary company.
- Establishing a branch office by registering itself (as a foreign entity) doing business in Australia.
The main practical differences between establishing a subsidiary company in Australia and doing business through a branch office are that:
- A subsidiary company is a separate legal entity and must have at least one director who is a resident in Australia, whereas a branch office is not a separate legal entity.
- A subsidiary (depending on the type of company) only needs to lodge its own accounts with the Australian Securities and Investments Commission (ASIC), whereas a branch office must lodge the accounts for the foreign company.
Can an overseas company trade directly in Australia?
It is possible to undertake transactions in Australia without establishing a business presence. However, the following issues should be considered:
- Tariffs apply to some goods imported into Australia, such as clothing, footwear and passenger cars and components.
- Agency and distribution arrangements are not specifically regulated, although franchising is subject to separate regulation.
Other legal issues that may arise in doing business in Australia include:
- Protection of intellectual property rights.
- The law of the contract, the relevant forum for enforcing the contract and the possible impact of the United Nations Convention on Contracts for the International Sale of Goods.
- Security for payment, including title retention.
- Dispute resolution and the relevant forum for settling disputes.
- Currency of payment and protection against exchange rate fluctuations.
- Potential product liability claims.
- Taxation, although Australia has an extensive system of agreements with its main trading partners to avoid double taxation.
If you need more information or advice, please click here to get in touch with us and book a free initial 15 minutes consultation.
Sources: ASIC, ATO, Thomson Reuters