The two most common structures for a foreign company to carry on business in Australia are through an Australian incorporated subsidiary or a branch of the foreign company itself.
The decision whether to establish a subsidiary or branch in Australia will largely be driven by commercial, legal, and tax considerations.
In our experience, depending on the scope of the business activities, it is more common for foreign companies to set up a separate Australian subsidiary. Factors that support this decision include:
- the ease and comfort for customers dealing with a separately identifiable Australian entity;
- the protection from liability afforded to the parent company if an Australian subsidiary is incorporated; and
- reducing the issues and disputes with revenue authorities that may arise in relation to determining the extent to which profits from carrying on business in Australia will give rise to tax in Australia.
There are different types of companies that can be incorporated in Australia. It is generally recommended that a proprietary company limited by shares be used – (i.e. the liability of shareholders is limited to the amount paid for shares, plus any amount unpaid on shares (if any)).