Difference between a company and a business name

Posted by Philip Wong on

What's the difference between a company name and a business name?

It's quite common when people, wishing to commence a business, confuse a business name with a company name.  They are not alike.  Here is why.

What IS a business name?

According to ASIC (the Australian Securities and Investments Commission) - a business name is a "name under which you conduct a business".  It's quite easy to register business names, and you can have as many as you like provided (a) you pay the fees for the name(s), and (b) that the names are not easily confused with that on another business.

Anyone can register a business name.  For example,  if a sole trader - let's name her "Mariah Bix" runs three separate business - making cakes that she sells, operates a cleaning business and also does hairdressing on the side.  She'd have no time for living a real life, but that's not the point of the story.

A name like "Mariah's Fancy Cakes" could be selected for the cake business; and something like "MB Cleaning" for the cleaning one, assuming that these names are free for Mariah to use and they do not confuse with any other business.  If Mariah operates her hairdressing business under 'Mariah Bix" she need not register that name - because everyone knows her which also identifies her business.  Therefore only two of the three must be registered with ASIC. 

Summary:  A business name is one that your business uses for the public and advertising purposes.

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Legal Entities

There are typically four common legal entities that operate businesses and deal with the public - 1.  a sole trader, 2.  partnership, 3. a company, 4. a trust (although a 'trust' is technically not a legal entity in its own right).   Legal entities exist in law with accompanying rights and obligations except for 'trusts' that do not.

Legal entities like sole traders, of which Mariah Bix is one, can operate a business; or a partnership that involves two or more sole traders.   Sole traders and 'partnerships' do not have to register themselves with ASIC, only their business name(s) if they wish to be known as something other than their real names.

Companies

A company is a separate legal entity is registered with ASIC.  A company is an entity with a 'separate legal existence from its owners'. The owners of the company are known as members or shareholders. Its legal status gives a company the same rights as a natural person which means that a company can incur debt, sue and be sued.

Companies usually have company names that end with 'Pty Ltd' in Australia.  'Pty Ltd' is short for 'proprietary company' - that describes a business structure with at least one shareholder (a maximum of 50), where the liability of shareholders is limited to the value of its shares.  'Proprietary' means that the company is a "private company"  and cannot offer its shares to the general public.

If a company has already registered a name like XYZ Developments company it does not need to waste time and money for a business name to trade as XYZ Developments;

On the other hand, if the company wishes to advertise to the public as 'Dinosaurs Boots' it must register this business name to link the company to the name.

Summary:  Companies don't usually register business names if they have chosen an appropriate name that reflects their business.

 


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