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Alex (LegalVision)
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Hi, downhaul!

If you’re thinking about expanding your business, raising capital by bringing on shareholders and investors then yes incorporating your business is a good idea. Of course setting it up is more complex but easily done with the help of a small business lawyer. Registering an incorporated company with ASIC costs $497, and the annual renewal fee costs $243.

To answer your question regarding limited liability, a company shelters or ‘veils’ it’s directors from personal liability as it is basically a separate legal identity from its directors. The law regards a company as its own legal person (or entity). So say if the company is being sued, or becomes insolvent, directors of a company have protection from creditors if the company goes into debt, unless they continue to operate the business while it is insolvent.

The type of work that your business conducts often determines the necessity of having limited liability. Normally, if your company is transnational or represents large clientele, from a commercial perspective, incorporation is desirable.

A limited structure, however, won’t completely shield the owners from responsibility. For example, guarantees may be personally required from proprietors seeking funding or renewed loans. In any case, you should consult a business lawyer for advice on the type of insurance you will need.

On the subject of tax – companies are taxed at a lower rate (30%), than personal income (45%), and even consider that there are also tax benefits of streaming income through a discretionary trust (but this is a much more complicated legal structure).

Hope that answers some of your questions, if you have any more don’t hesitate to get in touch! If you’re seriously thinking about incorporating your business then you could give us (LegalVision) a call for an obligation free consultation – we incorporate companies every day and would be happy to help!