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Why you should NEVER setup your own Pty Ltd Company (2 min read)

Starting your own business can be a rewarding and exciting experience, but it’s important to consider all the pros and cons before taking the plunge.

One option that many entrepreneurs consider is setting up a proprietary limited company, also known as a Pty Ltd. However, before you make the decision to go down this route and set it up on your own there are a few key things you need to be aware of.

Is it the right entity structure for you: Just because old mate at the pub has a company it might not be the right fit for you. There are many factors involved when discussing the right in fact we have a downloadable guide on this alone, you can download it here.

Complexity and paperwork: Setting up a Pty Ltd can be a complex and time-consuming process, requiring a significant amount of paperwork and legal compliance.

You’ll need to register your company with ASIC noting that you also need a company constitution which ASIC does not provide (you will need to source this from somewhere else).

You will also need to know how many shares to issue, at what value they will be issued and whether to hold these shares in your own name or under another entity for tax planning & retirement planning purposes.

You will also need to understand your role and what is required of you as a director and if there are more than one person involved in the business will you all be directors or just one?

Tax Registrations: You will then need to obtain an Australian Business Number (ABN) and a Tax File Number (TFN) and work out whether you need to register for GST and then whether it should be on a cash or accruals basis and also to comply with various regulations and regular reporting requirements. If you get these things wrong and miss deadlines it could be very costly later on down the track.

Cost: Yes establishing a Pty Ltd can be expensive when you factor in professional services such as legal and accounting fees however the cost if you do it yourself and get it wrong are far greater. There are ongoing costs to consider as well, such as annual ASIC fees, ongoing accounting fees and tax obligations to name a few.

Personal liability: While a Pty Ltd offers limited liability protection to its owners, this doesn’t mean that you are completely protected from legal and financial consequences. For example, if the company incurs debts or is sued, you could still be held personally responsible in some cases.

Separation of personal and business finances: Setting up a Pty Ltd requires a clear separation of your personal and business finances, which can be complicated and challenging to manage.

We hope this short post has been an informative one. If you need assistance in setting up a company you can book a consultation here.

Natalie Lennon

Founder & Director

02 9030 0269

@twosidesHQ Facebook & Instagram


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