When running a business, one of the most important decisions to be made is what name the business will trade under. This often becomes complicated for business owners where their structure involves multiple names.
There are often three types of distinct names which may be relevant:
- Legal Name: This is the name of the legal owner of the business, which appears on official documents.
Depending on the structure of the business, the legal name may be an individual, partnership, company or other entity.
- Trading Name: This is the name business activities were carried out under in the past.
Prior to 28 May 2012, businesses commonly operated under trading names, as business names did not need to be registered.
- Business Name: This is the name the business operates under.
As of 28 May 2012, and the introduction of the Business Names Register, those wanting to trade under a name different to their legal name need to register a business name with ASIC. The shift from trading names to business names offers increased consumer protection by enabling identification of the entity carrying on the business and how they may be contacted.
So, what name can I trade as?
Consider this scenario: you run a plumbing business, and that business is owned by Baker Love Plumbing Pty Ltd (Legal Name) which is registered with ASIC. The business can trade as Baker Love Plumbing Pty Ltd without consequence. But, if you want to start trading as ‘Baker Love & Drains’ (Business Name), Baker Love Plumbing Pty Ltd will need to register the business name ‘Baker Love & Drains’. To register a business name, you will generally need an ABN and to renew the business name registration periodically.
What happens if I trade under a name that is not my Legal Name or Business Name?
Under the Business Names Registration Act 2011 (Cth) it is an offence to carry on a business under an unregistered business name, unless an exception applies.
Practical Takeaways
Being aware of the name you can use in the ordinary course of business is crucial to ensure compliance with the relevant regulations and avoid committing an offence. The key is careful business planning and structuring, which should be done with the assistance of a lawyer and accountant. A prudent time to do this is before you have bought or established the business.
Business owners should also be aware that merely registering a Business Name will not necessarily protect the business’s brand. To provide increased protection, owners should consider registering a trademark and seeking advice regarding their intellectual property rights. Owners should also take care to ensure their Legal Name or Business Name does not infringe on another’s intellectual property rights or trademarks.
If you are considering buying or restructuring your business, we can help. Please contact us on (02) 4944 3322 or fill out the contact form below.
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