What is a Private Company?

Extract

Although it very much depends on the particular requirements of the controlling individuals, the proprietary company limited by shares (also known as a private company) continues to be popular choice for many commercial ventures. This is for the following reasons (among others):

• Well understood: Companies and the legal principles applicable to companies tend to be better understood by laypeople and financiers (as opposed to, for example, discretionary or unit trusts).
• Well regulated: Proprietary companies are regulated by the Corporations Act. This is a comprehensive act that addresses most if not all of the areas, and offers most if not all of the protections, of similar legislation in foreign jurisdictions.
• Limited liability: Subject to various exceptions, utilization of a company for a business venture continues to offer the benefit of limited liability to the persons controlling and owning the company.
• Legal personality: A company has the legal capacity and powers of an individual.
• Income tax: The corporate tax rate is 30% which compares favourably with the top rate of tax for individuals of 47% (plus 1.5% Medicare Levy). This allows for profits to be reinvested and compounded within a company in a comparatively low taxed environment. (This advantage should be measured against various disadvantages in the taxation of companies).
• Stamp duty: If incorporated in Victoria, no stamp duty is payable on the transfer of shares in a proprietary company.

Proprietary companies may not have more than 50 non-employee shareholders and are forbidden from raising monies from the public.

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