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Change of Sole Trader to Pty Ltd

Discussion in 'Starting a business' started by cokele, Apr 8, 2012.

  1. cokele

    cokele Member

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    Hi

    I am thinking of changing my business structure from sole trader to pty ltd. I have an existing pty ltd which was set up not long ago for one of my biz idea; however i have now decided not to go ahead and hence the pty ltd (GST registered) is dormant.

    Should I change the company name of the existing pty ltd or set up a new one?

    In terms of the cost, it is definitely cheaper to set up a new company.
    New company: $426 registration fee and $35 closure fee = $461
    Existing company: $212 renewal fee, $351 change of company name fee = $563.

    Will I be penalised for claiming GST input tax and closing a company in less than a year?

    Thanks!
  2. JacquiPryor

    JacquiPryor Well-Known Member

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    Don't forget if you set up a new Pty Ltd it will also pay annual fees of $212.00 - so, it may seem cheaper now, but would cost more in the long run.

    If you do set up a new Pty Ltd, or even running with the same company you already have - don't forget it will need its own ABN (separate/different to the one you have now as a sole trader) - so any clients/suppliers etc will need to be notified of the new entity & ABN.

    I don't think there is a penalty for closing within the year - so long as you don't have outstanding liabilities at the time of closing. You might need to double-check whether the $212 would still be payable - if the invoice has already been issued by ASIC, they may consider it payable whether you close the company now or not -I am sure someone will be along soon that can more certainly answer this part of your question :)
  3. Couple It

    Couple It Well-Known Member

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    Why not keep the company you already have?

    I'm assuming you have your business name registered, and that is how you trade? Then simply transfer ownership of your business name from your ABN to the company's ABN and be "company name" trading as .....

    My company name doesn't appear on any of my branding, stationery or website, so it really doesn't matter what your company name is...or does it?

    Wendy :)
  4. cokele

    cokele Member

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    Hi Wendy,
    Reason is that my existing company is named after a specific activity, ie pet grooming. It would sound odd if I intend to do wholesaling/distribution of, let's say, electronic products, especially when signing contracts with overseas supplies (pet grooming business selling electronics). I think we should be signing off as the existing pty ltd rather than the trading name with overseas companies (I may be wrong with this). That is why I am tempted to set up a new company using a general name (ABC Pty Ltd) to factor in different product categories I may sell in the future. :)
    Couple It likes this.
  5. cokele

    cokele Member

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    Hi Jacqui,
    I think $212 renewal fee is only applicable for existing companies. If I close the existing company now, I don't think i will need to incur $212. That is why setting up a new company is cheaper. Besides, setting up a new ABN & ACN is free and pretty easy. I shall then transfer the ownership of the business name to the new company. Not sure if there is any other implication of closing down an existing GST registered company just within a year or if there is any better/easier way of achieving my objective (a company with new name and principal activity).

    Appreciate if others can enlighten me. :)
    Thanks and Cheers!
  6. KarenC

    KarenC Well-Known Member

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    Something else to remember with PTY LTD - you will have extra insurances including workers compensation (even if it's just you), tax obligations, paperwork etc.

    I would encourage you to speak to a good accountant. All their fees are tax deductible and it's good to start on the right foot from the beginning.

    All the best.


    .
    1 person likes this.
  7. MelissaN

    MelissaN Member

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    It is now $226.50 and is an annual renewal fee. So whether you set up a new company or not is irrelevant as you will get the fee next year and each anniversary date thereafter.

    Ultimately, it's up to you. There is no issue but is cheaper to register a business name and trade as that.

    Sure, people may search the ABN of the business and see the company name, but how important is that really?

    That company might have multiple businesses tied to it - no one knows what you don't tell. Nor do you need to tell.
    2 people like this.
  8. MattR

    MattR Member

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    You can always just change the existing company name. ASIC form 484.
  9. victorng

    victorng Well-Known Member

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    You can't actually change a company's name using a 484. You need to pass a special resolution, lodge it with a Form 205 and pay the fee.

    But yes, changing the existing company's name makes sense.

    Cheers,
    Victor
    2 people like this.

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