Starting a Business
3. What is a Company?
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 06 Jul 2015
- A company is a separate legal entity that can hold assets, debts and liabilities in its own name.
- The participants in a company are the shareholders and the directors.
- The shareholders are considered to be owners of the business and usually provide the start up capital. However they have no direct ownership of company assets. Nor do they have participation in the daily affairs of the business management other than to elect directors.
- The directors control the company and are required to manage its day-to-day affairs in the best interests of the shareholders. A range of obligations and duties are placed on the directors as a result.
- There are two main types of company in Australia. These are called the 'proprietary limited' company and the 'public company'.
- Proprietary limited companies (also called private companies) cannot raise capital from the general public by issuing shares. Small family businesses are usually proprietary companies as are medium sized private enterprises. The persons establishing and running the business will often be the main shareholders, directors and employees. It is possible to have non-employee shareholders in a proprietary company but this number is limited to 50.
- Public companies are usually established with the aim of raising capital from the sale of shares to the public. This is often done by listing the company's shares for trading on a stock exchange. Such companies are often large, sophisticated commercial enterprises.
- This Legal Guide will predominantly deal with proprietary limited companies given that this structure is far more common for Small to Medium Enterprises (SMEs) in Australia.
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