COMPANY REQUIREMENTS

A Company is a creature of law. However, it generally has the rights and obligations of a natural person. A Company usually acts and thinks through the actions and thoughts of its Directors.

A Limited Liability Company is the most common form of corporate structure. When a company is set up, it is the company that is responsible for the business debts and obligations, not the people with own it. This protection is commonly known as limited liability, although often the protection can be short circuited, if Directors or shareholders of the Company have given personal guarantees to a Bank and/or suppliers in respect of the Company’s obligations, which is frequently required by such creditors. Nevertheless, the success of the Companies is manifest.

There are some disadvantages associated with a Company, such as the cost of incorporation and ongoing administration. There are strict bookkeeping and annual reporting requirements. Your business entity will be a closely held Company with only one shareholder and one director; essentially a corporatised sole trader.

Section 107 of the Companies Act 1993 is very useful for sole traders in that is allows various things to be done with minimal formality, if unanimous consent is able to be obtained from the shareholders of a Company. In a sole trade Company this is very easy to obtain!

The essential requirements for a Company are:

• A name
• Shares
• Shareholder(s)
• Director(s)
• Registered office
• Address for service

One of the principal reasons for setting up a Company is the protection of limited liability. It follows from the fact that a Company is a separate entity from the shareholders. Shareholders are not liable for the debts of the Company (unless the Directors and/or shareholders have personally guaranteed the performance of Company obligations) nor are the shareholders personally liable for the Company’s tortious acts or breach of contract.

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