Difference between registering a business name and a company?

What is the difference between registering a business name, and a company?

A business name is the title in which your business operates under. It is sometimes referred to as a trading name (however this is now an old term). If your business does not operate under its own company name (e.g. Bill Smith Pty Ltd) or your own name (e.g. Bill Smith), you will need to register a business name.

On the other hand, registering a company with ASIC makes your business a separate legal entity. A company is required to include the legal terms or abbreviations ‘Pty’ or ‘Ltd’ at the end of the name.

What is a company name

A company name as previously mentioned is a separate legal entity that is registered with ASIC. This is the name that appears on all official documents or legal papers and can be different to your business name. A company can choose to trade under a name that is different from its legally registered name.

For example, Safe Plumbing Services Pty Ltd could be the company of a business. However, it could trade and be known under its business name Safety First Plumbing. 

Registering a company name gives your entity legal status. This means a company can own, buy and sell property under its own name. You can employ staff, sue or be sued and also take on debt. Think of this as your business acquiring the legal rights of a natural person as its own separate entity. 

Depending on the legal structure of your company, your business will either be a Pty Ltd or Limited company. A Proprietary Limited structure is the most common type of company name registration for private companies. Registration of a Pty Ltd company legally ensures your business has certain privileges. This includes a company tax rate and limits the liability of the company shareholders alongside the assets of the company.

Setting up a company structure is always smart to ensure your personal and business assets are well protected. However, setting up a company structure has more administrative costs (e.g. ASIC annual review fee) associated with it. Company officeholders also have legal obligations under the Corporations act.

What is a business name 

Within Australia you must register your business name with ASIC unless you trade under your own name. Therefore, if you want your business to trade under a name that is different from your legal name you will have to register with ASIC.

For example Bill Scott a sole trader runs a chocolate store. Bill wants to trade under the name ‘Nice Chocolates’. This means bill will have to register his business name ASIC.

There are are few exemptions that apply to certain business who do not need to register their business name. These include:  

  • If you are trading as a sole trader and your operating name is your first and surname. 
  • Partnerships whose 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 name.

Keep in mind, as well once you register your business your name is registered nationally in Australia. Despite this, registering your business name does not give your business any legal protection. If you have only registered a business name your name can still be used by other companies. The only way to protect you from other businesses operating under your name is to use a trademark. This also applies to your businesses logo, the only way to legally protect it is to use a trademark.

To sum up

  • Registering your business name is legally required if you aren’t trading under your legal name or a company entity.
  • Establishing your business as its own legal entity can only be done through company registration

Thus, if you need any help setting up your business or picking your company structure for you. Get in touch with our Business Lawyers or call us on 1300 337 997.

About Phillip Salakas

Phillip is completing his law degree at the University of Technology (Sydney). He worked previously with Lawpath, and Justice Action. His interests are with construction and technology law.