Like you’re suddenly in a suit, sipping mineral water and calling people “Deborah” even if their name’s not Deborah.
But at its core, a company is just a structure for running your business or investments.
Think of it as a container.
Sole traders, partnerships, trusts: they’re all different types of containers. A company just happens to be one of the sturdier ones.
So, let’s break it down...
A company is a separate legal entity. Translation: it exists on its own, like its own person (minus the Netflix account). That means it can enter contracts, own assets, rack up debts and even be sued... separate from you, the owner.
You, as the owner, usually become a shareholder (you own it) and/or a director (you run it).
A company is a bit like a footy team...
Different positions, different jobs, all trying to keep the scoreboard ticking over.
Here are the main ones:
👔 Directors – They run the company day to day and make the big calls. They’re legally responsible for making sure the company follows the rules.
💰 Shareholders – They own the company through their shares. Shareholders don’t usually run the show but they can vote on major decisions and they get a slice of the profits (through dividends).
🗂️ Company Secretary (optional for small companies, but mandatory for larger ones) – Handles the paperwork and compliance with ASIC. Basically the team’s admin superstar.
🏦 ASIC – Not “players” you choose, but they’re always on the field. ASIC is the governments regulator for company’s and keep an eye on company governance and filings.
👉 In practice: In many small family companies, all these roles are filled by the same handful of people. Mum, Dad and maybe adult children may be directors, shareholders and even the secretary all at once.
Like a Tim Tam, a company has layers. And a few of them are pretty sweet:
✅ Limited liability – If things go pear-shaped, you’re generally not liable personally. Your personal house and family dog aren’t automatically on the line (unless you’ve given a personal guarantee, which banks often ask for).
✅ Tax flexibility – Companies pay a flat tax rate (currently 25% for small businesses). That’s usually lower than the higher personal tax rates, especially once you’re earning north of about $135k.
✅ Professional image – “XYZ Pty Ltd” just sounds more legit than “Shazza’s Sausage Sizzles.” Clients, suppliers and lenders tend to take you more seriously.
✅ Access to capital – You can issue shares, bring in investors, or even borrow more easily under a company structure.
✅ Succession planning – Ownership can be transferred relatively easily compared to other structures.
Of course, it’s not all sunshine and dividends:
❌ Set-up costs – Registering a company costs more upfront (usually $2,000+ with the proper advice, not just a DIY job online).
❌ Ongoing compliance – ASIC fees, annual statements, company tax returns, director responsibilities… the paperwork is real.
❌ Profit trapping – The money belongs to the company, not you. To get it out, you need to pay wages, director’s fees, or dividends. Each comes with its own tax implications.
❌ Complexity – More moving parts = more admin = more accountant fees (hi, that’s us).
So when does a company make sense? A few common situations:
Here's few common situations where a company might not be right:
A company is like upgrading from a tent to a brick house.
More secure, more permanent, but also more expensive to build and maintain.
If you’re running a hobby or small gig, stick with the tent for now.
But if you’re serious about growth, wealth protection and long-term play, a company might be your best move.
👉 Action: If you’re tossing up whether a company is right for you, have a chat with us before you hit “register.” Setting up a company just because it “sounds professional” is like buying a ute when all you needed was a wheelbarrow.
We’ll help you pick the right container for your business dreams.
– The team at PAL (making accounting slightly less boring since way back when)
Disclaimer: This article is here to give you general info only, not professional advice specific to your unique situation. While efforts are made to ensure accuracy, the content may change over time. We can’t take responsibility for any decisions based on the contents of this article, so be sure to chat with your accountant or advisor first!
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