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What does ordinarily resides in Australia mean for Australian company registration?

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What does ordinarily resides in Australia mean for Australian company registration?

Updated: 28 March 2022

When registering a company in Australia, you must have at least one director that ordinarily resides in Australia. This is a legal requirement under the Corporations Act 2001 (Cth). As long as one director lives in Australia, other directors can live overseas.

Ordinarily resides meaning

Unfortunately, the Corporations Act does not define the meaning of ordinarily resides, so you can look at the Australian Tax Office (ATO) residency test. This will give you an idea of the general meaning of what ordinarily resides means. It will also help you understand how tax will apply to you.

The following are the factors the ATO uses to determine Australian residency:

Your ties to Australia; for example, work, home and family.
How your actions or behaviour states your intentions; for example, setting up an Australian bank account, leasing a property for 12 months or more.
The location and maintenance of your assets; for example, buying or leasing a property and/or a vehicle.
Social and living arrangements; for example, joining a community club, playing competition sport in a local competition.
You can reside in more than one country.

For more information about setting up an Australian company as an international entrepreneur, see my article Tips for overseas entrepreneurs setting up an Australian company.

Other options

When you are a sole company director and plan to be overseas for a length of time, consider adding another company director that resides in Australia.

If you do not know anyone suitable, you can use resident director services to fill the role. You will pay a fee for the service but you will have a company director that is eligible as someone who ordinarily resides in Australia.

Good luck in setting up your company in Australia. I wish you every success.

I need advice about setting up an Australian company

International Startups

Which address should I use for an Australian company?

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Which address should I use for an Australian company?

Updated: 4 December 2019

When you prepare your company application form, you’ll find a few questions about your business address.

Below is an explanation of what you need to know when answering those questions

What’s the difference between all the address types?

Virtual address

The virtual address is simply an address that you can state your business operates out of if you don’t need to have a real physical presence, for example, if you run an online business.

Virtual office

A virtual office can offer options for mail collection, scan and email your mail and also office space and meeting rooms that you can use by the hour.

Registered office address

The registered office is your address that will receive correspondence.

Your registered address needs to be a street address.

Now, the registered address does not need to be the same as your principal place of business but it cannot be a PO box address.

The registered office address is important and you’ll need to be able to access mail that gets sent to it. It's also your official address for legal notices.

Business address

The business address may not matter so much if your business does not have a physical address.

If you want to indicate the location of where your business operates, you can rent a business address.

Important reminder for those on the road

If you are on the road for whatever reason, you need to make sure your registered office is reliable.

That is, whatever the address e.g. friend or family address or a paid registered office, that you are able to either have your mail physically forwarded to you or scanned and emailed to you.

Also, erring on the side of caution, it’s preferable if you can get both the physical option and the scan/email option so you can always access your mail.

What are your options if you don’t have an address?

If you travel overseas or just can’t always get to your mail, the options we discussed above can be purchased from businesses like registeredoffice.com.au and many more!

As always, get advice if you are in doubt.

Got questions or comments? Leave them below. I wish you every success in all your ventures!

I need legal help setting up my business structure

A startup's guide to working with a lawyer

International Startups

A startup’s guide to working with an Australian lawyer

Updated: 8 December 2019

Not all lawyers will charge their fees in the same way and not all Australian lawyer's work the same way. Here's what you should know in our startup's guide to working with an Australian lawyer.

Short on time? check out our 35 second summary video below.

If you are contemplating a start up and are unsure of how Australian lawyers work, why some charge a fixed fee and others an hourly fee or whether now is the right time to see one about your startup, you will benefit from our startup’s guide to working with a lawyer.

1. You have rights

First, there are some important rights that you have as a client and need to be aware of, these include:

The costs agreement: you have the right to negotiate your legal fees. Importantly, if you are handed a complex cost agreement, you can and should ask questions to make sure that you understand what you are signing.
Itemised bill: you also have a right to receive a bill before you pay for legal work.
Changes: you have the right to be notified of changes to your estimated legal costs.
Reports: you can request a written progress report for your matter.
Disputes: attempt resolution with your lawyer first, failing that you have the option of mediation, costs assessment and you can make an application to a costs assessor to have the whole or part of your costs agreement set aside.

You can also contact the Office of the Legal Services Commissioner or the Law Society of NSW for further guidance on your rights.

2. Fixed fee versus hourly fee

Some lawyers charge by the hour while other lawyers may quote you a fixed fee for your legal work.

Also, some lawyers may offer a free initial consultation so be sure to take advantage of this.

A fixed fee generally means for a set amount of work, you will be charged a fixed fee and not be charged by the hour.

You should ask your lawyer if your fixed fee will include third party expenses such as property searches or ASIC search fees.

Hourly fees mean that a lawyer will charge you for legal services based on how long it takes to prepare your work for example, you will be charged for how long any phone calls, emails or letters take. Hourly fees are common for litigation work because it is difficult for lawyers to estimate how long a matter will take.

So which is better?

Fixed fees provide start up’s with certainty about their costs and this can help with budgeting in those early stages. Hourly fees can sometimes be challenging for startups working with a tight budget and looking for certainty.

3. Arrive prepared

Before you see/speak to a lawyer, be sure to have a list of things that you would like covered such as your key concerns, goals and priorities.

Have you registered a company? terrific, bring your ASIC forms and registration paperwork to your meeting or email it to them so your lawyer can understand your company structure. Lawyers also need that information to draft your agreements if you decide to work with them.

If you haven’t registered a company or decided on your business structure, that’s fine, lawyers can advise you about what’s best for your startup.

Do you have a business plan or financial forecast? You can bring that also so your lawyer can understand your business goals, your industry and your competitors and give you more complete advice.

4. Prioritise

“Cash is king” - you may have heard this expression before. When it comes to your legal work, it’s a good idea to pay for what you need only and only when you need it.

Michael Law Group is an advocate of phasing legal work wherever possible to help startups preserve cash in those early days.

If your lawyer provides you with a proposed list of 10-15 items needed for your startup and you are feeling overwhelmed, ask your lawyer to rank each item in order of priority because this will help you manage your time and cash.

Did you know that while lawyers are responsible for drafting your legal documents, they also need your instructions to customise your documents? This will inevitably take away from your other setup activities so that's another good reason to prioritise your legal work.

5. Bootstrap online contracts versus custom lawyer build contracts

You can easily purchase online template contracts and some startups understandably opt for this to preserve cash.

Should you?

Some things to look out for if you choose this path include who prepared your document, was it a lawyer, business consultant? (ideally your documents should be prepared by a qualified lawyer). Also, when was the contract last updated?.And does your document cover your specific needs? You may not know the answer to the last question until you consult with a lawyer.

6. Lawyer's work style

You should work with a lawyer that you are comfortable with, preferably someone that explains legal issues in plain language and is prepared to answer your questions rather than just expecting you to accept their advice without question. A lawyer should make launching your startup easier not more difficult.

Key points

Below are the key points to keep in mind when working with a startup lawyer:

Work arrangement - understand the work arrangement well and ask questions
Fees - determine if fixed fee or hourly fees are better for your startup
Arrive prepared - give your lawyer the background information they will need to serve you best
Prioritise work you need from a lawyer to preserve cash flow
Templates - strapped for cash? decide if templates are best for your startup.

Do you have any questions or comments about working with a lawyer? Be sure to leave them below.

I wish you success in your ventures!

Help me with my startup

FAQ’s from entrepreneurs setting up an Australian Company

International Startups

Tips for overseas entrepreneurs setting up an Australian Company

Updated: 8 December 2019

If you are an overseas entrepreneur setting up a company in Australia, we have some useful tips to share with you based on some commonly asked questions.

1. Can I live overseas and set up an Australian company?

Yes, to do this, you will need to have at least one director that lives in Australia.

2. I don’t know anyone that is willing to be an Australian director for my company, what can I do?

For an annual fee, an Australian resident director service can supply a director for your company.

3. Do I need to give shares to the Australian resident director ?

No, you do not need to allocate shares to an Australian resident director.

And you can be the only overseas shareholder if you choose.

Also, directors do not have to be shareholders and shareholders do not have to be directors.

Finally, you should note that you need to have the minimum office holders required to run your company structure otherwise the Australian Securities and Investments Commission (ASIC) may fine you. This means, you need to have at least one resident director at a minimum.

4. How do I allocate shares to investors?

There are a few steps, let's go through each together below.

a. Term sheet

If you have not already, you should read our full article "4 tips for allocating shares to an investor".

First, discussions will take place with the investor, then the investor will usually present you with a term sheet that outlines the key terms for the share sale.

There is usually no intention for the term sheet to be binding.

b. Share sale agreement

After the terms have been agreed in the term sheet, these terms will be included in a share sale agreement.

A share sale agreement outlines the sale terms. This agreement helps set clear expectations for the sale and can reduce disputes.

Make no mistake, unlike the term sheet, agreements are legally binding. If in doubt, get advice before you sign one.

c. Shareholder agreement

The shareholder agreement usually follows the share sale agreement and will set out the roles and responsibilities of all shareholders including voting, share transfers and disputes

d. Register the share allocation

Finally, you will need to notify the Australian Securities and Investments Commission (ASIC) of the share sale. If you are unsure of how to do this, a lawyer or accountant can help you. Remember, you need to do this within the mandatory 28 days to avoid a fine from ASIC.

5. What costs are involved in setting up a company structure?

The initial setup cost will include the ASIC fee, currently around $500 and also the lawyer or accountant’s service fee.

ASIC also charges an annual renewal fee which is currently around $300.

6. How long does it take to set up your Australian company?

Your company can be set up in minutes if you have the right information. The Australian business number, goods and services tax registration, PAYG and company tax file number usually follow within a week.

Got questions or comments about setting up an Australian company? Be sure to leave them below.

I wish you success in your ventures!

I need help setting up a company

International Startups

Legal tips to help you run your Australian business from overseas

Updated: 8 December 2019

Have you have ever thought about living overseas while still running your Australian business ? Here are some tips to help you do that.

As there will likely be a tax impact for changing your residency status, get tax advice from a suitably qualified tax professional for your peace of mind.

1. Do you have a company structure ?

If you set up your business as a company and are sole director and also wish to continue running your business under your company structure, you may appoint another Australian resident director.

Why should you consider appointing another director ?

ASIC has a requirement that at least one director is an Australian that ordinarily resides in Australia.

A director must be 18 years old or older and consent to taking on the role and responsibilities of a director.

Assigning another Australian resident director allows you to continue to run your business via a company structure.

It's important to note, if you do not have the minimum office holders required to run your company structure, ASIC may fine you.

Another option, if you would like to avoid appointing another director is to change your business structure.

2. Sole trader structure ?

A sole trader does not have the same requirement as a sole director of a company to be resident in Australia so this is another suitable structure option.

A tax expert can advise you if you have changed residency and also about changing your structure from company to sole trader.

A sole trader must pay taxes at the individual tax rate whereas a company will pay taxes at the company tax rate which can be lower.

3. Legal and other tools to help you make your move overseas easier

Below are some useful resources to help you make your overseas move go smoother.

a. Resident director services

Australian director services can accept a director role in your company for an annual fee.

b. Virtual office services

You can use virtual office services for your business. Calls from your Australian customers can be answered locally and in your business name. Some packages also include mail receipt and forwarding.

Also, as ASIC requires a street address for the registered address not a PO Box so this is another good reason to consider virtual office services.

c. Legal agreements

If you are allocating shares to your appointed director, you may wish to consider a shareholder agreement. If you are hiring Australian employees or contractors to assist you then employment and contractor agreements can help you set clear expectations about roles, responsibilities, pay and minimise disputes.

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