Expanding your business at the national or international level is a big decision and arguably, one of the most important decisions you will make. One of the central questions when entering the Australian market, is how to structure your business to optimise your operation and to enhance the probability of your success. “Should I, as a foreign business owner, use a branch or a subsidiary structure for this purpose?” is a question that we are frequently asked. This article will discuss some key aspects you will need to examine when choosing which of these options is best for you.
A branch is in essence, an appendage of its parent company. It is established in an alternate location to extend the reach of the parent company by boosting its ability to distribute its goods and services to a broader client base. The operational mandate of a branch is the same as it is at the parent company’s headquarters (HQ). The branch office reports and obtains directions, solely from HQ. Your Australian branch is held to be a ‘foreign company’ and is not a separate legal entity under Australian law. Your Australian branch however, must at all times, comply with Australian law and tax compliance requirements.
If a foreign company wishes to trade in Australia, it must first register with the Australian Securities and Investments Commission (ASIC) as a registered foreign body and be issued with an Australian Registered Body Number (ARBN). While our staff are trained in facilitating these registrations, the registrations themselves are quite complex, requiring considerable supporting documentation. Far more so than when simply establishing an Australian subsidiary company. Significant delays can occur if application forms are not completed correctly, which may hold up your ability to commence trading within Australia. Our staff will be happy to assist you with completing your ARBN application, if you have any concerns.
Another mandatory obligation for your business to operate compliantly in Australia, is to obtain a registered office, as ASIC will use this address to send documents to the company. Your registered office must be open to the public on a daily basis. If you do not intend at least initially, to have your own office in Australia, then you will need to engage this service from a reputable registered office service provider. Your registered office will be recorded on the ASIC company register and as such, will be a part of public record.
Additionally, your foreign branch must always have a local agent. The local agent of your foreign company is answerable for any obligations that must be satisfied by the company and as such, may be legally liable for any infractions and/or penalties incurred by the company.
Financial statements and an annual return and must also be lodged with ASIC by your company each year. Financial statements are comprised of a copy of the company’s profit and loss statement, balance sheet and cash flow statement (all up to the end of the most recent financial year).
A public officer must also be appointed by your company. The company’s public officer is responsible and liable for all tax compliance requirements of your company.
Australian subsidiary company
When one company is owned and controlled by another company, the owned company is called a subsidiary. Most commonly, the parent company registered overseas, will own the shares (or, a majority of them) of the Australian subsidiary company. A subsidiary company is considered a separate legal entity under Australian law. It is a legal requirement that the Australian company within the group must have at least one Australian resident director appointed to its board of directors. If you do not already have an Australian resident director appointed to the board of your Australian company and/or, you would like assistance with registering a new, or purchasing an existing, Australian company, our firm will be happy to assist you with these requirements.
To meet ASIC compliance requirements, Australian companies must lodge an annual company statement. The purpose of the statement is to review and verify the accuracy of information held on the company register in relation to the company addresses (both registered office and principle place of business), the shareholders and directors. A small annual fee is paid by your company to ASIC, on or about the date of lodgement of the statement. The statement is provided online and can be obtained from your ASIC registered agent. Additionally, a solvency resolution must be prepared, signed by the directors of the company and held on file. If your company has not yet engaged an ASIC registered agent, feel free to contact our office for further information.
Your Australian subsidiary must also have a registered office and a public officer for reasons mentioned above.
Deciding on establishing a branch or subsidiary company as you will now understand, requires careful thought. You and your professional advisors will need to consider strategic matters such as how your expansion into Australia will best meet your existing aims and your future objectives; compliance matters such as taxation, Australian corporate legislation and employment of staff and possibly also, immigration concerns. As daunting as some of these factors may appear at first, Australia has entered its 28th year of consecutive annual economic growth. Given sufficient forethought and planning, your expansion to our friendly shores may prove to be the best decision you ever make!
If you are establishing a business and would like further information on starting up an Australian subsidiary or branch, or applying for an ARBN, feel free to call our office on +61 7 5600 9777 or complete our Contact Us Form.