With numerous ways to structure your business in Australia, choosing a suitable business entity based on your business goals may be challenging. Before you register company in Australia, you may have considered setting up a holding company in Australia. In this article, we will explore how to set up a holding company in Australia and the advantages of doing so.
What is a Holding Company?
A holding company is a parent business entity, either a Limited Liability Company or Corporation, formed to purchase and own shares in companies. These companies are subsidiaries of the holding company. Holding companies do not produce goods and services or sell products but rather, they own assets in their subsidiary companies.
A holding company does not usually participate in the daily operations of subsidiary companies and has control over the subsidiary companies. Both the holding company and the subsidiary companies are commonly managed by the same board of directors.
What is an Ultimate Holding Company?
A company is an ultimate holding company if it has a subsidiary, but it must not be a subsidiary of any other company. Often, holding companies are multi-level and an ultimate holding company is at the top.
How to set up a Holding Company?
Setting up a Holding Company is similar to setting up any other company in Australia. Before you proceed with Australia company registration, you will first have to select the appropriate structure for your business. While you can choose either Limited Liability Company (LLC) and Corporation, LLC is the most desirable business entity to set up a holding company in Australia.
An Australian LLC is also known as a private proprietary company (Pty Ltd). This is the most common and suitable business entity for foreign investors who are thinking of setting up a company in Australia.
The minimum requirements of setting up a limited liability company are:
- 1 shareholder of any nationality
- 1 local resident director
- 1 local resident public officer
- 1 company secretary
- Local registered address
Steps to set up a holding company in Australia:
#1 Reserve name of the business with Australian Company Register
Before you register an Australian company, you are required to do a company name registration in Australia. You can use the company’s Australian Company Number (ACN) as the business’s name.
Before you apply to reserve a company name, you have to check the availability of the name through the Australian Securities and Investments Commission (ASIC)’s check name availability search.
#2 Decide on state/territory of registration
You are required to nominate a state or territory of registration when you submit your application to incorporate your company.
#3 Have a registered address in Australia
Before starting a small business in Australia, your company is required to nominate a principal place of business and registered office in Australia.
#4 Register your business
You can register your business with the Australian Securities and Investments Commission (ASIC) on their website. Depending on your business activity, you will also have to register for relevant licenses and permits. You may check the Australian Business Licence and Information Service (ABLIS) to determine what your business requires.
After the registration of your business is completed, your company will receive an Australian Company Number (ACN), which is a 9-digit number issued by the ASIC or an Australian Business Number (ABN). All registered businesses in Australia are required to have an Australian Business Number (ABN). You can apply to the Australia Taxation Office (ATO) to receive your ABN, which is a unique 11-digit number.
All LLCs are required to file annual company tax returns with the ATO. In addition, it is mandatory to register for GST if the company’s turnover exceeds $75,000, which can be done with the ABN.
#5 Open corporate bank account
After the incorporation of your Australian company, your company is required to open a corporate bank account. Some of the Australian banks you can open a corporate bank account with include Commonwealth Bank of Australia, ANZ, and Westpac. Australian banks usually do not require you to travel to Australia for a bank meeting.
ASIC must be informed of the name of a company’s Ultimate Holding Company when a new company is formed. Otherwise, ASIC must be advised if another company later becomes the company’s Ultimate Holding Company.
Australian Securities and Investments Commission (ASIC) makes it mandatory to report your ultimate holding company at the time of formation and disclose its name on company records. Although the ultimate holding company and subsidiary companies are separate business entities, you are required to make returns and statements to ASIC on behalf of the group as a whole for reporting purposes.
ASIC must be informed if the company ceases its operations as an ultimate holding company or changes its name. The company secretary is responsible for informing ASIC of any changes and advice to ASIC must be lodged within 28 days of the event occurring.
Why establish an Ultimate Holding Company in Australia?
Having an ultimate holding company brings about numerous benefits.
- Holding companies provide asset protection. This is because holding companies are used to hold assets of their subsidiary companies, which are protected from debts and liabilities incurred by the subsidiary companies.
- Holding companies also provide risk protection. This is because holding companies are separate entities from subsidiary companies and hold their assets. This reduces the risk of losing the assets if the subsidiary company performs poorly or becomes insolvent.
- Moreover, it also allows you to minimise tax obligations. Holding companies can be structured to reduce the amount of tax that the group has to pay.
Looking to set up a holding company in Australia?
We at Tetra Consultants understand that the incorporation process of a holding company in Australia is cumbersome and would therefore like to offer you our services. Our service package includes helping our clients with planning and strategy and assisting them through the incorporation process.
Contact us to find out more about how to set up a holding company in Australia and our team of experts will revert within the next 24 hours.