A partnership is formed when two or more people go into business together with a view to making a profit. A partnership is not a separate legal entity.
A proprietary limited (Pty Ltd) company is an independent legal entity able to do business in its own right.
The shareholders own the company and directors run the company. The directors of a company, as well as company employees, can be shareholders.
A company’s operations are subject to the Corporations Acts 2001, overseen by the Australian Securities and Investment Commission (ASIC). This Act simplified regulations to allow a company to have only one director and only one member.
There are costs associated with registration a company and the company tax rate is 30% on all profits. However, a company often offers a greater level of asset protection as opposed to some of the other business structures, as our personal assets are separate from the business. With this in mind, major creditors will often require directors to personally guarantee the company’s liabilities.
Additionally, personally liability of directors and employee can also arise if they commit an offence under the Corporation Act 2001 or are found to have negligently performed their duties.
The advantages and disadvantages of a company are:
Advantages and disadvantages of sole trader business structure