When you run a business, you usually need an Australian Business Number (ABN). Although this is not a legal requirement if your business makes under $75,000, it is always recommended for a number of reasons. Some of these include being able to separate your business affairs from your personal ones, being able to organise your business and for tax purposes. Further, you will need to have an ABN to register a business name.
When would I need to register a business name?
If you operate your business as a sole trader or partnership, then the name of your business is legally your personal name. In order to change this to a commercial name, you need to apply for a business name. This is because sole trader structures are more tied in with the details of the person, rather than the business. In the same vein, sole traders and partnerships are taxed on their individual income, not corporate rates.
Example
Mary Johnson has started a vegetable market business, initially intended as a hobby. It has grown in popularity, and she now makes around $85,000 selling her vegetables to locals. Mary has now decided she wants to name the business ‘Mary’s Local Produce’. Mary has to first apply for ABN, both because she is making over the $75,000 threshold and also because she wants to officially name her business.
Why do I need to have an ABN?
Your ABN is the main number the Government and tax office will use to identify your business. Subsequently, if you want to officially register a name for your business, your ABN needs to be linked to it. If you do not have an ABN, then you won’t be able to register your business name. However, you can do this quickly online and then register your business name straight after.
If you want to start a company
By contrast, starting a company means that you also automatically register a name for it. This is because companies have a ‘separate legal personality’ from its director or owner, and is named accordingly. Your company name will be what you want to call it, followed by the suffix ‘Pty Ltd’ in most cases, which means proprietary limited.
Example
Suppose Mary has decided to register her vegetable business as a company. In this case, she will need an ABN. However, she will be able to register her company’s name when she is starting her company. Instead of just being named ‘Mary’s Local Produce’ it will be officially named ‘Mary’s Local Produce Pty Ltd’.
Registering a name for your business is crucial when it comes to branding, marketing and generally getting your business out there. Although registering for an ABN is not always compulsory, it’s required if you want to register a business name. If you’re unsure of whether you should register an ABN or start your own company, a business lawyer can advise you.