Advantages and Disadvantages of Incorporating a Business

Corporations Law

Question 1
With the increase in the number of small and medium scale businesses in Australia more and
more people are interested to incorporate their business. A n incorporated business also called a
corporation is effective as it provides number of offers to the business owners as compared to
sole trader or proprietorship business. Incorporating a business means separating the business
from others by making it a separate legal entity. There are number of different advantages to the
incorporating a business. According to the present case Michael is doing well with his business
as a sole trader organisation (Bourne, 2016). His sons have grown up and want to join the family
business as they see future prospect but the father is little skeptic. In this case it is extremely
important to make sure proper advice could be given to him.
A company is a legal entity that helps to operate smoothly across Australia. The different steps
which need to be followed to complete the incorporation process which are as follows:
 In the pre incorporation stage the organisation has to create a new company name which
would go into the application form. It is important to choose the right company name
which would help to provide effective promotion to the organisation. In the present case
Michael is persistent of not changing the business name because it would change the way
business is conducted. The present business name is quite renowned as everyone knows
this well but with a change of name the consumers wouldn’t be able to recognise the
brand anymore. Legally the existing name of the business can go in as the company name
with respective change indicating the incorporation (McLaughlin, 2018). Hence, there
would be no need to make change in the business name. Even if Michael agrees on
making a change in the company name it will have to be seen that the name they decide
in this case “Sicilian Treat” is not an existing business name registered with another
company. The ASIC portal provides the option to register the business name effectively.
It is also important to check existing trademarks or names attached with the business
name or else any other company could take legal action (Cumming and Johan, 2016).
 Internal governance has to be followed effectively by the organisation either with the
help of drafting a constitution or by following the replaceable rules of the company act.
The internal governance is extremely important hence, has to be kept in mind.

 Every person who decides to incorporate a business needs to have consent from the
directors or secretary of the company hence; it is an important step to decide the directors
of the company (French, Mayson & Ryan, 2014).
 In order to register the company every individual willing to register an organisation has to
submit the 201 form to the Australian Securities and Investment Commission to secure
company incorporation. As soon as the form and the incorporation procedure is finished
the unique nine digits number which is mandatory to have for every Australian company
known as the Australian Company Number.
 The tax registrations have to be done effectively once the company incorporation is
complete. With the Australian business number and individual tax filing number the tax
registration is done (Haldane, 2015).
 The change of the company structure is important to continue with the business
operations and hence, it is important to have a suitable company structure which would
help the organisation of Michael to run smoothly.
There are few important things which have to be kept in mind in order to run the newly formed
company in the best possible manner. For instance, the organisation and the business registration
numbers would be generated in the official address of the organisation hence, it is important to
decide on the official operating place in an effective manner. Apart from that it is important to
take consent before providing the roles of directors or members of the organisation (Lipton,
Herzberg & Welsh, 2014).
Implementing a new company structure would be important in order to operate the organisation
in a company form because it would help to operate the organisation as per the business rules
and legislations of the country. Going for company incorporation comes with its share of
advantages and few disadvantages. The advantages of company are as follows:
 Incorporating a business provides an excellent chance to raise capital in an easier manner.
Small businesses face significant problem with capital and hence, incorporating a
business provides effective opportunity of raising capital effectively. since incorporated
businesses have number of tax and liability flexibility raising capital becomes easy which
is an extremely important aspect in the field of business (Hannigan, 2018).