Proprietary Limited Company

Proprietary limited companies are the most common company structure in Australia and account for 98.5% of all companies. Generally, they are the most appropriate company structure for small businesses.

A Proprietary Limited company (also known as a Pty Ltd company), cannot raise capital from the public, and is restricted to a maximum 50 non- employee shareholders.  Shareholders personal assets are protected due to the companies limited liability status. 

The advantages of operating a business through a proprietary limited company include:

  • 30% tax rate (standard company tax rate).
  • 27.5% tax rate for companies with a turnover less than $50m pa (falling to 25% in 2021/22). 
  • Limited liability – this ensures the shareholder’s liability is limited to the capital invested in the company.
  • Ability for investors to pool their investment funds together.
  • Ability to introduce new shareholders, and change current shareholders.
  • Easier succession planning (as companies have perpetual succession).
  • Extra tax saving opportunities/strategies. For example, the owners' private motor vehicles can be salary packaged by a company, but not a sole trader. 
  • Privacy - the ability to keep the company’s owners (shareholders) secret.

The main disadvantages of operating through a company are:

  • It doesn’t receive the 50% general capital gain discount like individuals.
  • Extra compliance and regulatory costs (i.e. annual ASIC fee of $263). 
  • Directors legal obligations and duties need to be considered.