Subsidiary or Branch: Choose the right Business Structure when Setting up in Australia

subsidiary-or-branch-setting-up-a-company-in-australia-choose-the-right-business-structure

While you can change your business structure  down the track it can be more complex to do so. Therefore we recommend putting in thought at the beginning about your business and how you think it will operate moving forward. Below we outline the most common business structures when setting up a company in Australia and some of the pros and cons of each. Remember this is general information and everyone’s circumstances are different, so it is always best to discuss with an accountant before making a final decision.

DOWNLOAD OUR GUIDE TO SETTING UP IN AUSTRALIA

Subsidiary or branch?

In establishing operations in Australia, an overseas company may choose between two main options:

  1. a company,
  2. or branch.

A company ('a subsidiary')
A subsidiary is a company that is owned and controlled by another company. 'A company' is a separate legal entity and lets you conduct business throughout Australia. Most subsidiaries are set up as proprietary companies that are limited by shares.

Registered Foreign Company (‘a branch')

A foreign company ('a branch') is one that is incorporated outside Australia. A foreign company can register with the Australian Securities and Investments Commission (ASIC), allowing it to carry on business in Australia. Upon registration, the company is issued with an ARBN (Australian Registered Body Number) and is required to provide annual reporting directly to ASIC.

If at any point the branch operations are such as to constitute carrying on a business, it will be necessary to register the overseas company as a foreign company in Australia.

Related: Challenges Foreign Companies face when setting up a business in Australia


The most common business entity being set up in Australia is a company 

In Australia the most common business entity is a company limited by shares. These can be either proprietary or public companies. A company can be incorporated as a proprietary company or a public company.

A proprietary company (commonly referred to as a private company) is limited by shares and includes in its

Memorandum or Articles of Association that it may:

  • Have no more than 50 shareholders
  • Not engage in any activity that would involve the issue of a prospectus, except share offers to existing shareholders or employees.

There are no requirements at law for restrictions on share transfers. However this can be provided for in the company’s articles. Accounts reporting and audit requirements for a proprietary company depend on whether it is categorised as small or large.

A public company is defined to be a company which is not a proprietary company. Some of the differences between a proprietary and public company are as follows:

  • Directors – A proprietary company is required to have at least one director who must ordinarily be a resident in Australia and a public company is required to have at least three directors, of whom two must ordinarily be residents in Australia 
  • Accounts and audit requirements differ
  • Only public companies may be listed on the Australian Security Exchange Limited (ASX).

According to the Corporations Act a company can be:

  • Unlimited with share capital
  • Limited by shares
  • Limited by guarantee
  • No liability (this only applicable if the company’s objects are solely mining or mining related).

Related: Duties of Directors: Does my business require a Company Secretary?


Our International Team

Azure Group has built a dedicated International Client Service Team with the necessary experience and knowledge in the Australian Corporations Law and other Compliance & Regulatory requirements in Australia to assist your company establish and maintain its Australian presence. Our team are industry leaders holding various qualifications across Accounting, Governance, CA & Master of Tax, AICD, ASX, COSCES. We have acted on over 1000 clients in managing Governance and local Australian regulatory requirements.

We are here to assist with any questions you may have about setting up a business in Australia. If you are concerned about your business structure we recommend speaking to one of our International specialists who can advice you on commercial considerations for choosing the right structure.

Have you noticed our #FridayExpertTips... here's one that relates to #International

"There's a long list of things to think about when SETTING OUT IN BUSINESS. Go out and speak to people. The insights of other business owners and accountants or advisors can really make a difference."

 

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About Author

Michael Derin
Michael Derin

Michael Derin, Azure Group's Group Managing Partner has over 25 years experience as a qualified Chartered Accountant within the business and commercial sectors. Michael works across our Technology, Corporate Advisory and CFO operations, managing highly complex projects to success.

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