Question

Question 1 (This question is from the Week 1 Tutorial) James, a sole trader, is considering registering his business as a company. James wants to establish limited liability for himself as a director, shareholder, and employee of the company. Advise James on the following questions a) and b) as stated below: a) Does the creation of a company absolutely remove him from any potential liability for injury, loss, or contracts made by his company? (3.5 marks) b) Would James need any interactions with the Australian Securities and Investment Commission (ASIC) or the Australian Securities Exchange (ASX) if he set up a company? (3.5 marks) (Maximum 250 words for each).

Answer 1

a)  company is an entity that has a separate legal existence from its owners. The owners of the company are known as members or shareholders. Its legal status gives a company the same rights as a natural person which means that a company can incur debt, sue and be sued. Companies are managed by company officers who are called directors and company secretaries.

yes , creation of company will remove james from all liabilities made by him. because conpamy has its own name and contractual liability. so campany can enter contracts on its own. it can sue and be sued.

b)

If you want to set up a company you’ll need to complete the registration process with ASIC and check that your company complies with its obligations under Australian law. Here we outline your legal requirements.

You will need to set up a current registered office as ASIC will use this address to send documents to the company. Your principal place of business will be the location from which your company operates its business.

A company must also inform ASIC of the name, date of birth and current residential address of all directors.

Update ASIC on key changes

You must notify ASIC of changes to the company’s registered office, principal place of business, directors and business names within 28 days to avoid late fees.

Read more on how to update your company details with ASIC.

Keep financial records

A company must keep up-to-date financial records that correctly record and explain transactions and the company’s financial position. Larger companies have additional obligations to lodge financial reports with ASIC.

Find out more about lodging financial reports and books and records.

Pay fees to ASIC

Fees that companies must pay ASIC include company registration fees, annual review fees, lodgement fees and late fees. Find out more about ASIC fees.

Check annual statements

Each year, ASIC will send your company an annual statement. To remain a registered company, you will need to check the details on your company statement and update any changes with ASIC, pay the associated annual company review fee, and pass a solvency resolution stating that you have reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.