What business is my company in?
You’d be forgiven for getting confused in the multitude of business terminology out there, and ‘street’ tax advice unfortunately can be misguided or half truths. We’ve had many a client say they have a company but on further inspection, they are actually operating as a sole trader and have just a business name, or, are using a name without even registering it. There’s further confusion with ASIC’s takeover of the state based business names, previously referred to (and unregulated) as trading names. So let’s try to help clarify some things here.
Some may say, well why do I have to use the right terms? It’s because it’s the difference between being Bob’s Apple Shop and BHP Billiton. It’s very different, and when you’re engaging with other businesses and authorities the rules and requirements differ, along with the way to go about it and the risks you may create or face.
So let’s get up to speed on the correct lingo here. A business is the operation of making money commercially. It is itself an asset that generally can be bought and sold. It is not however a type of structure or a name.
A business name however is just a name that you use to trade under. It’s for recognition, brand equity and also to appease fair trading & consumer laws. A business name has to be registered, and once done, prevents someone else registering the same name. An example would be Robert Kardashian trading as Bob’s Apple Shop. Although I don’t think the Kardashians need to sell apples.
A company is a legal structure. It’s the shell and legal entity of what ordinarily owns a business or investments. That said, the company name itself does provide you your business name also and prevents anyone registering that same name as either a company or business name. So you could just register Bob’s Apple Shop Pty Ltd and you’re done. You can however attach additional business names to a company. We often recommend a generic company name and then attach business names. An example may be Client Holdings Pty Ltd trading as Bob’s Apple Shop. A generic company name allows better administration if the company owns multiple businesses or buys and sells businesses – you can easily and cheaply change business names, not company names.
Trading names that were unregulated on the old ABR website pre May 2012 and that are not actually registered will be removed (so the ABR says) in November 2018. You can normally see this status however if you do name searches on the ASIC website. But be careful as this can trick you up. If a name is only listed as a trading name then you should be able to properly register it as a business name.
Hopefully that helps clear things up a bit and illustrate the importance of using the correct terminology when you’re representing your business.
Dean Milner | technical talent for StartusupTM.