100 Accounting: Business Reporting for Decision Making
paying the outstanding debts. This form of business structure is popular among sporting clubs and not-
for-profit organisations such as charities and social groups, which do not usually make a profit but need
to be a separate legal entity. For example, Green Collect (www.greencollect.org) is a not-for-profit social
enterprise that works for sustainable social and environmental change. It became a company limited
by guarantee to meet its goal of providing increased numbers of supported employment opportunities
through ensuring its activities are viable and sustainable. Operating as a company limited by guarantee
provides Green Collect with a framework to support the work involved in delivering environmental ser-
vices. Green Collect builds inclusive workplaces that create sustainable change in the world. The com-
pany collects unwanted materials, such as printers, print cartridges, corks, mobile phones and so on, and
recycles or converts them into new products.
No-liability company
No-liability (‘NL’) companies are companies that have shareholders who have no liability for the out-
standing debts of the company, due to the risky nature of the company’s operations. Shareholders are
attracted to this type of company as there is the possibility of obtaining a good return on their investment.
However, there is also obviously no guarantee. For that reason, if a no-liability company becomes insol-
vent, shareholders have no further responsibility (they don’t even have to pay any outstanding amounts
owed on their shares). In Australia, these companies are solely mining companies. Forte Energy NL is a
no-liability company incorporated in Australia on 7 March 1984. It is listed on the Australian Securities
Exchange (ASX) and also on the London Stock Exchange (LSE). The company states the following in
its constitution relating to the liability of its members: ‘The acceptance by a person of a share in the
Company, whether by issue or transfer, does not constitute a contract by the person to pay calls in res-
pect of the share or to make any contribution to the debts or liabilities of the Company’.
Unlimited company
Unlimited companies are characterised by members who have no limit placed on their liability. This
form of company is usually restricted to investment-type organisations.
3.8 Advantages and disadvantages of a company
LEARNING OBJECTIVE 3.8 Discuss the advantages and disadvantages of a company.
As outlined earlier, companies in Australia are divided into proprietary and public companies, the latter
having several further divisions. Following is a broad overview of their advantages and disadvantages.
Advantages
The main advantage of forming a company is the limited liability that shareholders have for business
debts. Other advantages include taxation, as company rates may be lower than some individual tax rates.
As of 2015, the Australian company tax rate is 30 per cent and the top personal tax rate is much higher.
(Current personal tax rates can be found on the Australian Taxation Office website, http://www.ato.gov.au.))
The company form of ownership can also provide entities with additional opportunities to make income
through expanded business networks, as some businesses are reluctant to trade with sole traders and
partnerships because of their non-legal status. Companies also have the ability to raise large amounts of
capital through public share offerings.
Disadvantages
There are several disadvantages of the company form of business structure. First, the company is more
expensive and time consuming to establish. Companies must comply with the Corporations Act and
other legal requirements from which partnerships and sole traders are exempted. Most companies must
hold annual shareholder meetings, prepare financial statements based on accounting standards, and lodge
their financial statements with ASIC. Companies are subject to the company rate of tax. The limited