One of the most popular business structures is Pty Ltd in Australia. Starting a business is a big decision, and there are many factors to consider, such as the business structure.
A Pty Ltd is a private company that has only a limited number of shareholders. It offers a number of advantages for businesses. This includes limited liability, which means that the shareholders are not personally liable for the debts of the company. Proprietary limited companies are also relatively easy to set up and maintain, offering several tax benefits.
A Pty Ltd company, often the preferred structure for small business owners, is distinct from a public company in several key ways. In this article, we will take a closer look at proprietary limited companies and explore why they are an excellent choice for businesses in NSW.
What Is Pty Ltd Australia?
In Australia, ‘Pty Ltd’ stands for Proprietary Limited Company. It is a type of business structure that operates exclusively and does not offer shares to the public. A Pty Ltd Australia company is a separate legal entity that can have a maximum of 50 shareholders and does not offer public shares.
As such, it cannot list its shares on the Australian Stock Exchange (ASX). Ltd companies, on the other hand, have no limits on their number of shareholders. This allows them to raise capital more freely by selling their shares to the general public.
There are large proprietary companies and small proprietary companies. A proprietary company is judged to be large if it satisfies at least two of the following criteria:
- Annual revenues of $10 million or more Assets of $5 million or more 50 or more employees
- Large proprietary companies need to lodge their annual accounts with the ASIC.
Additional Information
The company’s liability is limited to the value of shares, and directors are protected from any liability for the company’s debts. Pty Ltd companies are the most common companies in Australia and serve as an effective company structure for small to medium-sized companies.
If you’ve chosen to set up a proprietary limited company, you can register it online at the Australian Government Business Registration Service website. Other companies that are registrable on the website are public companies limited by shares or guarantees, public companies with no liability, and special purpose companies.
According to NSW Fair Trade, the Corporations Law (Corporations Act 2001) governs private firms such as propriety limited companies and imposes stringent responsibilities on board members. Compliance with Corporations Law can come at a substantial initial and ongoing administrative cost. Because of this, the structure is typically thought to be more appropriate for medium-sized to large firms.
To help you set up your pty ltd Australia company, the Australian Securities and Investments Commission (ASIC) can provide all the information you need.
Pty Ltd Australia 2024 Changes
Since the start of 2024, there are several legal changes in terms of how Pty Ltd Australia should operate. Check out these changes below:
- Starting July 1, 2024 – New minimum wage
The new national minimum wage will be $915.90 per week or $24.10 per hour. This rate will be effective from the first full pay period starting on or after 1 July 2024. Note that the national minimum wage increase covers every employee who is not covered by an industry award or registered agreement.
- Starting August 24, 2024 – Changes to terms and conditions for casual and independent contractors
There will be new definitions for casual employment and independent contractors. Additionally, there will be new frameworks to allow casual employees to change to permanent employment. Moreover, these changes include protection of independent contractors performing work on digital labour platforms that are employee-like workers.
- Starting July 1, 2024 – New company and business name fees
Company and business name fees will also increase. Here are the rates:
| Company Fees | From 1 July 2024 |
| Application for registration as an Australian Company (proprietary company that has share capital) | AUD 597 |
| Reserving a company name | AUD 61 |
| Late payment fee for up to one month late | AUD 96 |
| Late payment fee for more than one month late | AUD 401 |
| Application for voluntary deregistration of a company | AUD 49 |
| Annual review fee for a proprietary company | AUD 321 |
| Annual review fee for a registered scheme or a public company | AUD 1492 |
| Business name fees | |
| Registration or renewal for one year | AUD 44 |
| Registration or renewal for three years | AUD 102 |
#1: Advantages of Pty Ltd Australia
Pty Ltd companies in Australia offer several advantages, including limited liability, tax efficiency, better branding, attracting stakeholders, and increased credibility.
Limited Liability Protection
One of the most significant advantages of a Pty Ltd company is limited liability protection for its shareholders. This means that the shareholders’ assets are protected if the company faces financial difficulty or insolvency, and the liability of the shareholders is limited to the amount they have invested in the company, which reduces their risk exposure.
Higher Level of Professionalism and Stability
Pty Ltd Australia companies can also project a higher level of professionalism and stability by having strong branding associated with their business, which sole traders need to gain. Additionally, investors, suppliers, and customers generally prefer to conduct business with registered Pty Ltd companies over sole traders, which gives stakeholders higher confidence, and investors are more likely to invest in company structures.
Tax Advantages
Pty Ltd Australia companies can access certain tax advantages, such as lower corporate tax rates than personal income tax rates, and they may also be eligible for other tax benefits, such as franking credits.
#2 Setting Up a Proprietary Limited Company in NSW
To set up a pty ltd Australia company in NSW, you can follow these general steps:
1. Choose a company or business name: The company or business name must include “Proprietary Limited” or “Pty Ltd” at the end of the name. You can check the availability of the name on the ASIC Connect website.
2. Appoint a company director: The company must have at least one director who is a resident of Australia.
3. Register the company: You can register the company online through the Australian Government Business Registration Service website. The online form will guide you through the process and ask for information such as the company name, director details, shareholder details, and the company’s registered address.
4. Obtain necessary licenses and permits: Depending on the nature of your business, you may need to obtain licences and permits from the relevant authorities.
5. Set up a business bank account: You must open a separate bank account for the company.
6. Register for taxes: You must register for an Australian Business Number (ABN) and Goods and Services Tax (GST) if applicable.
7. Maintain company records: You must keep accurate records of the company’s financial transactions, including income, expenses, and assets.
It is recommended to seek professional advice from a lawyer or accountant to ensure that you comply with all legal requirements and regulations when setting up a proprietary limited company in NSW.
#3 Ongoing Requirements of a Proprietary Limited Company
Complying with ongoing requirements is essential for a proprietary limited company in NSW to maintain its legal status and enjoy the benefits of the business structure. Failure to comply with these requirements can result in penalties, fines, and legal action against the company and its directors. The ongoing requirements of a proprietary limited company in NSW include:
Compliance with company law
Pty Ltd companies must comply with the provisions of the Corporations Act 2001 and other relevant legislation. This includes maintaining accurate company records, filing annual financial statements, and holding annual general meetings.
Reporting obligations
Pty Ltd companies need to lodge annual financial reports with the Australian Securities and Investments Commission (ASIC). These reports include the company’s financial statements and directors’ and auditor’s reports. Additionally, they must report changes, such as changes in the company’s details, in directors or shareholders, to the ASIC.
Tax obligations
Pty Ltd companies must register for and pay taxes, including income and Goods and Services Tax (GST) if applicable. They must also maintain proper accounting records and submit tax returns to the Australian Taxation Office (ATO).
Shareholder obligations
Pty Ltd companies must keep a register of shareholders, including their names, addresses, and shareholdings. They must also issue share certificates to shareholders and provide regular updates on the company’s activities and financial performance.
Director obligations
Directors of Pty Ltd companies have various duties and responsibilities, including acting in the best interests of the company, exercising care and diligence, and avoiding conflicts of interest. They are also responsible for ensuring the company complies with its legal obligations and maintaining proper financial records.
Renewal of registrations
Pty Ltd companies must renew their registrations with ASIC annually and pay the required fees.
Planning To Set Up a Pty Ltd Australia Company Soon?
If you’ve been spending your days thinking about setting up a pty ltd Australia company soon, don’t hesitate to consult a business lawyer. A business lawyer can provide valuable assistance in setting up private companies in Australia.
Our business lawyers at JB Solicitors are competent legal practicioners who can assist with the registration process, including reserving the company name, preparing the necessary legal documents, and submitting the application to ASIC.
Moreover, our lawyers can help ensure ongoing compliance with legal and regulatory requirements, including filing annual reports, maintaining accurate records, and complying with tax obligations.
Submit an enquiry today.
Last updated: 29 November 2024
