Advivo explains the difference between a company name and a business or trading name.
As an accounting firm in Brisbane, we often get asked to clarify the difference between a company and a business or trading name, particularly when setting up businesses for our clients. Below, we outline the key differences that distinguish the two.
What defines a Company?
There are five main aspects that define a company:
- A company is a separate legal entity often followed by “Pty Ltd”, or “Limited” depending on the legal structure of the company. A business name is not a legal entity.
- Its legal status gives a company the same rights as a person, meaning that a company can own, buy, and sell property in its own name. It can also incur debts, employ staff, sue and be sued.
- A company name is the entity’s legal name that appears on documents like legal contracts or bank statements. It should be unique and not identical to an existing company or business.
- Companies must be registered with ASIC, and company officeholders have legal obligations under the Corporations Act.
- Registering a business name does not provide exclusive ownership of that name. It also doesn’t prevent other people from being able to register and use similar names. Our trademarking can provide that kind of insurance.
A company is a complex business structure, with higher set-up and ongoing administrative costs (i.e. ASIC Annual Review Fee). This is where accounting firms in Brisbane – such as Advivo – can help. Our business advisory experts will make sure that no stone is left unturned that your due diligence is managed and you are not vulnerable to competitors or in some cases deliberate “copycats.”
What is a Business Name?
A business or trading name is an ASIC-registered name under which an entity can carry on its business activities. A company can trade as the business name, in fact, a company can trade under different business names to address different markets.
Unless you trade under the following exceptions, you will need to register your business name:
Exceptions to this include:
- If you are operating as an individual (i.e. sole trader) and your operating name is the same as your first name and surname.
- If you are in a partnership and your operating name is the same as all the partners’ names, or;
- If you are an already registered Australian company and your operating name is the same as your company’s name.
There are many aspects to consider, but one of the most commonly misunderstood aspects is that registering a business name does not provide exclusive ownership of that name. It also doesn’t prevent other people from being able to register and use similar names.
What is a Trading Name?
A trading name is a name that businesses use to operate and conduct activities. This is different from a legal business name.
Before the introduction of the National Business Name Register on the 28th of May 2012, a “Trading Name” was an unregistered name that businesses were able to use. Between the transition period between 28 May 2012 to 31 October 2018, businesses were allowed to use their unregistered trading name to decide whether to register them. After 31 October 2018, businesses were required to register a business name when wanting to trade under a name other than their legal entity name.
It’s also important to note that just because you have a company or business name, this does not mean your logo is protected. As well as registering the business name, you can also register your logo as a trademark to protect others from copying it.
Deciding how to approach your company, business, and trading name can be confusing, but that’s where accounting firms in Brisbane can help. Advivo has years of experience in establishing companies and providing business advice to ensure our clients have the most appropriate structure to mitigate risk, cost-effectiveness, and current and future taxation planning. Get in touch today.
