A company is a legal entity, distinct from its creators, members, directors and managers. Chapter 3 of this book discusses the separate legal status of the company in detail. For the purposes of this current chapter, we emphasise that for a company to come into existence there must be a conferral of that status by the state. Unlike some other forms of association, such as a partnership, it is not legally effective for a group of people to simply declare themselves to be a company. A company is a type of corporation. The corporate status of a company is brought into existence through a process of registration under the Corporations Act. Other types of corporate entities are created by different legislative mechanisms, and we briefly describe some of these later in this chapter.

This chapter describes the range of basic company structures available under the Corporations Act, focusing on three ways in which companies can be categorised: their proprietary or public status; how they structure the liability of their members; and their relationship to other companies. The chapter examines the role of corporate groups, as well as the difference between closely-held, one-person, and widely-held companies.

This chapter deals with taxation when a corporation derives income. It presumes the profits have a domestic source, are retained (no distribution) and that the capital structure of the corporation does not change. The discussion explores the relationship between the identification of corporations under corporate law and the entities that are the subjects of corporate tax systems. Some non-corporate entities are often within the corporate tax system and some corporate entities are not (including check the box). It also considers the subcategorizations of corporations for tax purposes. The structure of the corporate tax base is explored and its relationship with financial accounts. Special rules for corporate groups are considered, with a focus on deferral of intra-group transactions and group loss relief. Consolidation and other options are discussed. Section 1.3 first explores some philosophical approaches that have often been suggested as a basis for corporate taxation. The discussion proceeds more directly to discuss policy options and considerations in selecting a corporate tax rate. Finally, the chapter considers the taxation of shareholders and controllers with respect to retained profits. This is a particular type of tax transparency and is often applied in the context of personal services corporations.