If you’re an entrepreneur based in Australia and looking to take advantage of the benefits offered by a Limited Liability Company (LLC), you may be wondering if it’s possible to set up an LLC in Australia. While Australia doesn’t have the LLC business structure, there is a viable option available. You can establish a US-based LLC and operate it from Australia as a foreign company. This setup allows you to tap into the US market, enjoy pass-through taxation, and protect yourself against personal liability. In this comprehensive guide, we’ll walk you through the process of setting up an LLC in Australia, including important steps like obtaining a US bank account, an Employer Identification Number (EIN), and setting up your payment processor.
Understanding the Difference Between LLC and PTY LTD in Australia
Australia does not offer the option of opening an LLC as a legal entity. Instead, the closest alternative is a Proprietary Limited Company, commonly known as PTY LTD. PTY LTD companies are privately owned and restrict ownership to 50 non-employee shareholders. One notable advantage of a PTY LTD is the extensive privacy it provides for shareholders, as they are protected under Section 45A of the Corporations Act 2001 (Cth). PTY LTD companies also enjoy benefits such as no size limitations based on turnover or assets, reduced regulatory and compliance burdens, and limited obligations toward disclosure.
On the other hand, a Limited or LTD company in Australia is partially publicly owned and offers limited liability to business owners. These companies are regulated by the Australian Securities and Investments Commission (ASIC) and Australian Prudential Regulation Authority (APRA). The most significant difference between an LTD and a PTY LTD is the ability to generate capital through public ownership. LTD companies are required to provide annual public accounts to the ASIC, similar to the US Security Exchange Commission (SEC). Additionally, LTD companies must have at least three directors, while PTY LTD companies can have just one.
6 Steps to Setting Up an LLC in Australia
If you’re considering setting up an LLC in Australia as a foreign company, follow these six simple steps to ensure a smooth process:
Step 1: Choose a Unique Name for Your LLC
Before you can establish your LLC, you must come up with a unique name for your business. The name should comply with certain requirements established by the US Secretary of State. These requirements include including “LLC,” “L.L.C.,” or “Limited Liability Company” in the name and avoiding the use of words associated with government organizations or well-known businesses. To ensure the uniqueness of your LLC name, conduct thorough research by searching the Secretary of State’s website, checking the availability of the web domain, and verifying if the name is trademarked.
Step 2: Appoint a Registered Agent (RA) for Your LLC
As a foreign company operating a US-based LLC from Australia, you will need a Registered Agent (RA) to handle official correspondence on your behalf. The RA must be located in the state where your business is formed and should be available to accept tax notices, legal summons, and other important documents. You can choose a US-based friend or family member as your RA, provided they meet the criteria set by the Secretary of State. Alternatively, you can opt for professional RA services like doola, which offers a free RA for the first year when incorporating your LLC from Australia.
Step 3: Obtain a Physical Mailing Address in the US
To receive official correspondence and open a US bank account, you will need a physical mailing address in the US. doola offers a service that provides a physical address with a genuine lease, which can be used as proof of address when applying for a US bank account. Additionally, doola offers a full mailbox service that allows for mail scanning and forwarding, even if you don’t have a US Social Security Number.
Step 4: Obtain an Employer Identification Number (EIN)
An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is a unique identifier used by the Internal Revenue Service (IRS) to track your business for tax purposes. An EIN is necessary if you plan to hire employees, open a business checking account, build credit, or create accounts with platforms like Stripe US or PayPal US. Obtaining an EIN requires filling out forms and obtaining state approval for your LLC. You can choose to apply for an EIN through the IRS by filling out an SS-4 form or use services like doola, which can assist you in the application process.
Step 5: Open a US Business Bank Account
To operate your US-based LLC effectively, you will need a US business bank account. Opening a US bank account while living abroad can be challenging, but doola has partnered with several US banks to make the process easier for international founders. With doola, you can open a US bank account without an SSN and benefit from their expertise in assisting international founders with the application process. doola Banking also offers additional services like tax and bookkeeping services.
Step 6: Set Up Your Payment Processor(s)
Choosing the right payment processor is crucial for your business, as it affects transaction fees, micropayment fees, chargeback fees, and data portability. Consider your business model and the types of payments you’ll be receiving when deciding on a payment processor. Popular options include PayPal and Stripe, both of which offer services for US-based businesses. To set up a PayPal or Stripe account, you will need your EIN and a virtual address provided by doola.
Timeframe for Setting Up an LLC in Australia
Setting up a US-based LLC from Australia involves completing various paperwork and applications. With doola’s assistance, the process can typically be completed within a week to ten business days. However, the timeframe may vary depending on seasonality and other factors. For more details on the time it takes to set up an LLC in 2023, you can refer to doola’s comprehensive article on the topic.
In conclusion, while you cannot directly open an LLC in Australia, establishing a US-based LLC and operating it from Australia as a foreign company is a viable option. By following the six steps outlined in this guide, you can navigate the process successfully and enjoy the benefits of a US-based LLC while running your business from Australia. Remember to seek professional guidance from services like doola to streamline the process and ensure compliance with all legal requirements.