How to start a company in Australia

The notion that every business begins with a great idea can inspire the entrepreneurial spirit in just about anyone. But it doesn’t quite capture the full story. To actually start a company in Australia, you’ll need to register your business.

Registering your business determines:

Who owns the business
How it will be taxed
Other critical details about how your business will operate

In this article, you’ll learn not only how to register a business and where to turn for help.

If you’re considering starting a business or are actively getting one off the ground, go ahead and bookmark this article so you can refer back during each step of the startup process.

Disclaimer: This content should not be construed as legal or tax advice. Always consult a lawyer, accountant or tax professional regarding your specific legal or tax situation.

Choosing a business structure

There are three main types of business you can register as in Australia:

Sole trader
Company
Partnership

The type of structure you choose will determine business ownership, liability and taxation.

Let’s look into each of these in more detail now.

Sole trader

If you run your own business as an individual and work for yourself, you can set up as a sole trader.

Photo by Faizur Rehman on Unsplash

With this structure, you keep all your business’s profits after you’ve paid tax on them.

The main thing to note about setting up as a sole trader is that you are personally responsible for any losses your business makes.

Ownership: One person

Owner liability: Full personal liability

Taxes: You’ll need to file a tax return through The Australian Tax Office (ATO) every year. When you’re a sole trader, you can do this online using your existing individual Tax File Number (TFN).

Pros:

The set-up process is simpler than with a company.
You have full control of your decisions; you don’t have to answer to anyone.
There are fewer reporting requirements.
You can use your existing bank account, although it will help with your own accounts to set up a separate business account. Read Do you really need a separate business account? for details.

Cons:

You are liable for all company debts, so if you get into hot water, your personal finances can be on the line.
It can be difficult to raise startup funds when you are a sole trader.

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How to set up as a sole trader

You can become a sole trader in three steps and sometimes even less.

Step 1: Register for your Australian Business Number

Issued by the Australian Tax Office, an ABN is an 11-digit number that is unique to your business. Sole traders don’t need to have one by law, but having one will help you avoid pay-as-you-go taxes on some of the payments that are made to you.

Step 2: Register a business name

Again, this isn’t a compulsory step for sole traders — you can operate under your own name without having to register your choice to do so.

However, if you want to run your business under another name, you’ll want to register it.

Before registering, you’ll need to make sure the name isn’t being used by someone else using the Australian Securities and Investments Commission website.

You’ll also need to check it’s not trademarked using the Australian Government’s IP search service.

Once you’ve gone through these checks, you can register your business name through the Business Registration Service (you’ll need your ABN to hand).

Get start-to-finish help on choosing a business name in this post (9-minute read).

Step 3: Understand how to file your first tax return

As a sole trader, you can file a tax return using your own Tax File Number through the Government’s online myTax service.

You might also want to think about setting up superannuation for yourself. This is a good way to make sure you’re saving for your retirement.

Company

When you register your business as a company, your business is seen as a separate entity to yourself and/or the people who run it.

Photo by Milos Lopusina on Unsplash

Your personal finances are not affected should anything unexpected happen to your business’s affairs.

A company is owned by the shareholders and run by its directors. Directors can also be shareholders.

The Australian Government’s Business Registration Service advises: ‘Companies suit people who expect their business income to be highly variable and want the option to use losses to offset future profits.’

Ownership: Shareholder/s.

Owner liability: Limited.

Taxes: Companies must file an annual tax return through the ATO using their own Tax File Number (TFN). If your company earns more than $75,000 and/or provides taxi/limousine or ride sourcing services, you must also register for goods and services tax (GST). All companies registered for GST must also complete Business Activity Statements every quarter.

Pros:

Your personal liability is limited.
You’ll usually have better access to funding.

Cons:

It’s more complicated to set up as a company than a sole trader.
More reporting is required when you have a company.
There are more costs to setting up and maintaining a company than a sole trader.

How to set up as a limited company

As mentioned above, it takes more time and effort to establish yourself as a limited company than as a sole trader. But if you’ve decided this business structure is best for you, it’s a necessary evil. To make things simple and to ensure you’re ticking all the boxes, it’s a good idea to enlist the help of a professional to carry out this process.

Step 1: Choose your business name

Before you can register a business name, you’ll need to make sure it’s not being used by anyone else using the Australian Securities and Investments Commission website and ensure it’s not already trademarked using the Australian Government’s IP search service.

Step 2: Decide on your company governance

If your company amounts to a single member who is also the sole director, you don’t need to have a formal set of rules in place for how your business will operate. But if there are more people involved, the Corporations Act dictates that you have to officially outline how your company will run.

Many companies choose to operate by ‘replaceable rules,’ which are essentially pre-written basic rules for internally managing a company.

Other companies choose to write their own constitutions.

Step 3: Get your Director ID/s

Every Australian company must have at least one director and that director (and all others in bigger operations) must have their own director ID. Directors are legally required to adhere to the Corporations Act.

You can apply for a Director ID through the Australian Business Registry service.

Step 4: Get consent

To register a business, you’ll need to get consent from the people who will fill these roles:

Director
Secretary (you don’t need a secretary if you’re a one-person operation)
Member (every company must have at least one member, but the member and director can be the same person)

Step 5: Register your company

Once you have completed the above steps, it’s time to finally register your company with the Australian Securities and Investments Commission.

The cost of doing this can be between $474 and $576.

To tick a few tasks off at the same time, you can use the Australian Government's Business Registration Service (BRS).

Your registration will need to be renewed every year.

You’ll be given an Australian Company Number once the registration is complete.

Step 6: Get your Tax File Number

As mentioned above, while a sole trader can use their own individual tax file number to file tax returns, a company will need its own.

Partnership

Forming a partnership is the easiest way to establish a business when there is more than one owner or entity involved.

Photo by Tom Crew on Unsplash

A partnership works a similar way to a sole trader — with the owners being responsible for any company debts — but with more than one person at the helm.

Here, the risks and rewards are shared.

Note a general partnership is different to a limited partnership or limited liability partnership, which are less common. You can read more about these on the government website.

Ownership: Two or more people or entities.

Owner liability: Full personal liability.

Taxes: A partnership must have its own Tax File Number or TFN and must file an annual tax return through the ATO.

Pros:

Less paperwork than with a company.
Less expensive to set up than a limited company.

Cons:

Personal liability for losses.
With two or more people equal at the helm, any disagreements can be tricky to resolve.

How to set up as a partnership

Different partnership laws apply to different states across Australia.

You can dig down into the details for your state or territory via the links below:

Australian Capital Territory

Step 1: Choose a name

If you intend to trade under your own names, such as A Jones & B Thomson, you don’t need to register an official company name.

However, if you want to operate under another name, you’ll need to register that name with the Australian Securities and Investment Commission (ASIC).

Step 2: Apply for an ABN

You can do this through the Australian Business Register.

Step 3: Draft a partnership agreement

This agreement will outline how the partners intend to run and manage their business. It should contain details like:

How the partners will receive the profits of the business
Who has the authority to make decisions
How the partnership will sign formal documents
How the partnership should be dissolved if the worst happen

Step 4: Register your partnership

With your ABN and name to hand, you can formerly register your partnership with the Australian Business Register.

Step: Get your taxes in order

To begin paying taxes you’ll need to get a Tax File Number for your partnership.

Extra considerations for all business types

Once you’ve registered your business, you’ll want to double check you have all your other paperwork in order.

Ask yourself:

Do I need any licenses or permits — for example to play music, prepare food, sell alcohol, or trade in a public place? Different states have different rules, but you can check on any licences you might need using keywords and locations, e.g. café Canberra, on the Australian Business License and Information Service website.
Do I need any insurance? This could include public liability insurance and workers’ compensation insurance if you employ people. Read more about business insurance on the Australian Government’s website.
Will I benefit from joining local business groups? Starting a business can be a daunting challenge, but you don’t have to go it alone. Using local resources, such as grants or webinars on topics helpful for entrepreneurs, can give your business a competitive advantage in the form of financial resources or valuable knowledge.

Beyond joining business groups, consider connecting with other small business owners in your area. You can share insights about the customers in your community, run cross-business promotions and strengthen your business’ ties to your area.

Starting a business is a process with many steps — but don’t let yourself get discouraged. Just focus on the next step as it comes. Step by step by step, you’ll get there!

How to start a company in Australia – FAQs

Still have questions about how to start a company? The answers may be here.

How much does it cost to set up a limited liability company in Australia?

There’s no easy answer to this question, as the cost of setting up a company will depend on all sorts of aspects, from industry to business size.

Registering a company, however, can cost between $474 and $576, not including accountant or legal fees.

How do I start an LLC in Australia?

Setting up an official company in Australia can be a complex process. There steps include:

Choosing a name
Deciding on company governance
Registering for Director ID
Obtaining consent
Registering your company with the Australian Securities and Investments Commission, using the Australian Government's Business Registration Service (BRS)
Filing for a tax file number (TFN)