A company or corporation (the words have the same meaning) is a legal entity that is separate from its members. When you form a company, you form an imaginary legal person which can hold and dispose of property, take legal action and sign documents. Because of this separate legal entity a company can have assets and liabilities and make profits and losses quite separately from its members.

You may form, or already be in a company for a number of reasons including:

So what exactly is a company, and what are its advantages compared to those of a sole proprietorship or partnership? A company is a legal entity separate from its members. It can acquire and dispose of property, take legal action against people or other bodies, and - through its human managers - conduct its business as a human would.

The federal Corporations Act 2001 - a lengthy and complex statute - controls the operations of all companies in Australia. It is administered by the Australian Securities and Investment Commission (ASIC) which displays a great deal of useful company information on its website (link to website: www.asic.gov.au).

In the course of simplifying company law, a Small Business Guide was introduced as Part 1.5 of the Corporations Law. It is available through the ASIC website. It is easy to read and is a very good introduction to the principles and operations of our current company law.