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Can One Person Form A Company |
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Yes a single person can form a company. The person can be the Director and sole shareholder in a Pty Ltd Company. Below is an article that we have written on the topic if you wish to know more.
Are you planning to operate a small business on your own?
There are two business structures that may be appropriate for a small
outfit like yours: a single proprietorship (sole trader) or a
registered company.
While you may consider setting up a single proprietorship, the
Corporations Act of 2001 does allow you to set up a company with just
one person to own and run everything.
If this is the way you want to go, then all you have to do is indicate
your choice in the ASIC registration application as “a
proprietary company with limited liability”.
You will be both the sole shareholder and the sole director of your
company. Thus, your type of company is legally
referred to as a sole shareholder/director proprietary company.
You may wonder why anyone would choose to register as a sole
proprietary company rather than as a single proprietorship.
Well, there are some real advantages to being registered as a sole
shareholder/director company. Some of the reasons people
choose a company over a proprietorship are:
* Legal personality of company.
Once a company is registered with the ASIC and an ACN has been is
issued, the company becomes a legal entity with a personality that is
independent and separate from its shareholder.
This distinct personality has important legal effects: A
company can enter into contracts in its own name and it can also sue,
and be sued. When a company is in debt, the money
owed does not automatically become the debt of the shareholder. As a
result, a civil lawsuit for the collection of a sum of money against
the company is not necessarily a legal action against the shareholder.
This is because the liability of a shareholder is limited to the value
of his shareholdings unless he previously signed a personal guarantee
in favor of the one pursuing legal action. This built-in
limitation is not available in single proprietorships or for sole
traders. So if you are conducting business by yourself, and you wish to
limit your business liability, then the sole shareholder proprietary
company is for you.
* Flexibility in ownership
If your business grows in the future and you wish to create incentives
for your non-shareholder employees who have contributed to the success
of your company, then a good way is to increase their involvement by
transferring shares in the company to them.
This is also known as a stock option. Because of the
company’s structure, you are able to accommodate additional
non-shareholder employees into the company shareholdings without having
to terminate the company’s legal status.
* Continuity
Another advantage of the independent personality of the company is that
it may continue to exist for the duration of its registration,
notwithstanding changes in the ownership of the company’s
shares.
The death or retirement of a shareholder or the sale, transfer or
assignment of the rights to a company’s shares will not mean
the termination of a company’s existence. You may one day
decide to hand over the reins of the company to someone else, such as
one of your experienced managers or employee-shareholders.
While the director may be changed, the company continues to exist as
its registered self.
It is possible to register a company online, but if this is a daunting
prospect for you, ASIC has appointed registered agents, like Companies
Now (www.companiesnow.com.au ) who can advise and manage your online
company registration.
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