company is a separate legal entity and can incur debt, sue and be sued. The company’s shareholders (the owners) can limit their personal liability and are generally not responsible for company debts.

A company is a complex business structure and has high set-up and reporting costs. You can form a company as either a private (also known as proprietary) or public entity.

A registered company must have at least one director (and a company secretary unless it is a private company). A director is responsible for managing the company’s business activities.

To become a company, an entity must:

• be incorporated under the Corporations Act 2001
• be registered with the Australian Securities and Investment Commission (ASIC).

A registered company requires at least one director (and a company secretary for public companies). Directors are responsible for overseeing and managing the company’s activities.

Advantages

• Limited liability: Protects shareholders from personal responsibility for company debts.
• Established structure: Widely understood and accepted in the business community.
• Capital raising: Can secure significant funding.
• Loss offsetting: Can carry forward losses to offset future profits.
• Ease of transfer: Simple to sell or pass on ownership.
• Profit distribution: Earnings can be reinvested or distributed as dividends.

Disadvantages

• Costs: Higher setup and ongoing compliance expenses.
• Reduced control: Ownership is shared, and decision-making is structured.
• Complex reporting: Regulatory compliance can be challenging.
• Limited loss distribution: Losses cannot be distributed to shareholders.

Directors play a critical role in managing a company’s activities and ensuring compliance with legal obligations. If you’re considering becoming a director, ensure you have the time, knowledge, and willingness to fulfill these responsibilities.

Do not accept a directorship on the promise that “you won’t have to do anything”—this could expose you to serious liabilities

Directors must comply with the Corporations Act 2001 and act in the best interest of the company. Key responsibilities include:

• Acting in good faith and for a proper purpose.
• Avoiding conflicts of interest and disclosing any personal interests.
• Assessing the impact of business decisions on the company’s financial position and reputation.
• Ensuring the company can meet its financial obligations.
• Seeking professional advice when needed.

Failure to meet these obligations can result in civil or criminal penalties.