[ESTABLISHING A BUSINESS ENTITY IN AUSTRALIA]
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in Australia and may be personally liable for breaches; and • must have a registered office in Australia. Choice of Australian Branch or Subsidiary There are a number of factors to consider when deciding whether to establish an Australian branch or incorporate a new company in Australia as a subsidiary of a local parent company. These factors include the following: • a subsidiary is a separate legal entity from its parent company. It has limited liability, and the parent is not usually liable for the debts or obligations of the subsidiary. There are some exceptions to this, such as in the case of the insolvency of the subsidiary; • an Australian branch of an overseas company is not a separate legal entity. Therefore, the overseas company will be liable for all debts and obligations of the Australian branch; • the use of an Australian branch may cause practical difficulties when dealing with financiers. For example, if finance from an Australian financial institution is required, then that institution may require audited financial statements relating to the Australian operations of the applicant. This may not be readily available in an acceptable form in the case of an Australian branch; • the use of a branch may also cause some difficulties when dealing with third parties. For example, they may need to be satisfied as to the nature of the foreign corporation’s legal structure and the means by which it is able to bind itself to obligations in Australia; and
• the annual return of a branch office must include the worldwide financial accounts of the company of which it is a branch, unless exempted by ASIC. This document is available to the public. Partnership A partnership is an arrangement between two or more entities to carry on a business together with a view to a profit. Except for certain professional partnerships, business partnerships cannot have more than 20 partners. A partnership is created by an agreement among the partners. Usually, this agreement is documented in a written partnership agreement. Partnerships are regulated by the terms of the partnership agreement (if there is one), the common law and the relevant Partnership Act which applies in the applicable state and territory. A partnership is not a separate legal entity. Therefore, each partner is jointly and severally liable for the debts of the partnership. Partners also share in the profits of the partnership. Limited partnerships can also be established in some states under specific state legislation. Limited partnerships allow some partners to limit their liability for debts. Limited partnerships are generally taxed as companies. Joint Venture A joint venture occurs when two or more parties come together in order to undertake a specific project. The joint venture arrangement can be incorporated or unincorporated. (a) Unincorporated Joint Venture In an unincorporated joint venture, the parties usually enter into a joint venture agreement, which sets out the rights and obligations of each joint venture party.
ILN Corporate Group – Establishing a Business Entity Series
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