What is a Pty Ltd company?

A Pty Ltd company is a separate legal entity: it can enter contracts, own property and incur liabilities in its own right, apart from its directors and shareholders. Its name must include "Proprietary" or "Pty" and "Limited" or "Ltd" and comply with ASIC naming rules, and its legal basis is the Corporations Act 2001, which ASIC administers and enforces.

Shareholders own the company and approve major transactions in general meetings, with rights set by the constitution or the terms of their shares, but they do not run day-to-day operations unless they are also directors or employees. Directors, who must be at least 18 and not disqualified, manage the company and carry the statutory duties that come with the role. Compared with a sole trader or partnership, the structure means more record keeping and cost, but it brings limited liability and credibility with suppliers and lenders.

Proprietary companies are classed as small or large for reporting and audit purposes. A company is generally large if it meets at least two of three tests on a consolidated basis for the financial year: consolidated revenue of $50 million or more, consolidated gross assets of $25 million or more, or 100 or more employees.

Large proprietary companies must prepare financial reports and directors' reports, lodge them with ASIC and may need an audit. Small proprietary companies face lighter reporting obligations but must still keep accurate financial records, meet their tax obligations and may have to prepare reports if shareholders or ASIC ask. Check ASIC's guidance for the current thresholds and exceptions.

Directors must act with care and diligence, in good faith and in the company's best interests, for a proper purpose, and without misusing their position or inside information. They must disclose and manage conflicts of interest and must not let the company trade while insolvent or likely to become so. Breaches can bring civil penalties, criminal charges, compensation orders and disqualification from managing companies.

Once registered, the company receives an ASIC annual statement and pays an annual review fee, must notify ASIC of changes to directors, addresses and share structure within set timeframes, and must keep minutes, statutory registers of members and option holders, and financial records for seven years. Security interests it grants are registered on the PPSR, not on a company register of charges. It pays income tax at the company rate that applies to it, which depends on whether it is a base rate entity, so check the current rates with the ATO. It takes on PAYG withholding and superannuation guarantee obligations once it employs staff.

Registration starts with checking the name is available and choosing whether to rely on the Corporations Act's replaceable rules or adopt a constitution. You appoint directors, and a company secretary if you want one, with their written consent, nominate a registered office and principal place of business, and apply to ASIC with the director, shareholder and share structure details. Every director must hold a director identification number before appointment, applied for through the registry that administers director IDs. ASIC charges a registration fee and issues the ACN.

You then apply for an ABN separately, register for GST and PAYG withholding if turnover or staffing require it, set up the registers and minute book, and update bank accounts, contracts and invoices with the company's name and ACN. If the company will need finance for assets or working capital, equipment finance and business loans are the usual starting points.