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Legal status of a company vs a business name in Australia
Updated: 5 December 2019
When you're setting up a business structure you will likely hear the phrase ‘a company has its own legal personality’, particularly when you read about different business structures in Australia.
So what exactly does legal personality mean?
And, what’s the status of a business name?
We’ll discuss both below.
Let's begin with a company.
Company
When you set up your company, you’ll choose a company name and you will be given an Australian Company Number (ACN).
Also, you can choose not to have a company name and simply use an ACN.
Either way, once set up, you’ll have a company that is legally able to:
- enter all sorts of contracts;
- hire workers
- sue and be sued; and
- pay taxes to the Australian government.
So whose liable for the company?
The directors of the company are liable for how the company is run day-to-day.
Practically, this means:
- directors or their delegates can enter into contracts on behalf of the company
- if the company is being sued, the directors will need to defend the company;
- Directors will give new hires contracts or delegate this task to someone (under section 126 of the Corporations Act 2001); and
- the directors are liable for the company financials, and this includes paying taxes on time.
Business names
Now, the legal status of business names can be a source of confusion for many.
Unlike a company, a business name does not have a legal personality.
This means a business name cannot enter contracts, hire workers, sue and be sued or pay taxes to the government.
And, if you plan to trade using a name other than your company name, you'll need to register your business name.
So what’s the legal status of a business name? Its intellectual property - an intangible business asset of your business.
Below are some of the features of a company and business name side-by-side.
company | business name |
|---|---|
Legal personality | No legal personality |
Company name can also be the trading as or T/A name | If you aren't using the company name to trade, you need a business name |
Shown as ABC Pty Ltd ACN xxx xxx xxx (9 digits) | Shown on shop fronts, websites, apps or on whatever you are selling |
Company name and other company assets are IP you can protect | The business name is intellectual property you can protect |
A unique company name and business are essential for avoiding claims from other businesses that you are breaching their intellectual property rights.
Do you have a company or business name query or comment? Feel free to share it below in the comments.
Finally, I wish you every success in your ventures!