As your business grows, you may find yourself outgrowing your sole trader structure.
If you’re planning to hire more employees, seek additional investment or even manage your personal liability, then a company structure might be right for you.
However, you may be left asking yourself, ‘Do I really need to transfer my sole trader business name if I register a company?’
Good question. The short answer is no.
This post will go through everything you’ll need to know to keep your sole trader name if you register for an Australian company structure.
Read along!
Do you really need to transfer your sole trader business name if you register a company?
If you’re asking yourself ‘ Do I really need to transfer my sole trader business name if you register a company?’
The short answer is NO.
If you want to use your sole trader name for a company, you don’t need to transfer anything.
There is no requirement on your part to initiate a transfer, and if you do, the Australian Securities and Investments Commission (ASIC) will reject your company registration application.
However, the same rules do not apply if you plan to transfer your business name to a new owner. Let’s go through those requirements now.
When am I required to transfer the business name from sole trader to company?
We’ve already established that there is no requirement to change your sole trader name when registering a company.
However, there are some situations where you do need to formally transfer your business name if you are the current owner of a business and you wish to transfer your business to a new owner.
There are transfer requirements for current and new business owners.
Current business owner
If the new owner wishes to use your business name, you will need to transfer it if you are the current owner. The steps to transfer your business name are through the ASIC website. The steps are:
- Go to ASIC Connect and log in to your account.
- Link your business name and Australian business number to your account with your ASIC key
- Select the Lodgements & Notifications tab at the top of the ASIC Connect page.
- Select the business name you’re transferring.
- Select Cancel/Transfer business name in the transaction column and select Go.
- Select ‘I would like to transfer the business name’ and select Next.
- Review your transaction.
- Complete your declarations.
- Confirmation.
In 24 hours, you will receive an email with your transfer number. The new business name owner must receive the transfer number. With this number, they can register the business name in their name.
New Business Owner
As the business’s new owner, you also have specific requirements once the current business owner transfers the business to you.
If you are a new business owner, you will need to register the business name in your name, using the transfer number that the current business owner sends to you.
There are also a few steps to complete as the new business owner through ASIC Connect. If you need assistance with your application, our friendly customer care team can help you.
Need specialised advice regarding your company?
Contact a Lawpath consultant on 1800 529 728 to learn more about company registration, customising legal documents, obtaining a fixed-fee quote from our network of 600+ expert lawyers or to get answers to your legal questions.
Why do sole trader businesses choose to become a company?
As a sole trader, there’s a genuine possibility that your business can grow, and you may start thinking about setting up a more formal structure.
If this happens, you can change your small business structure to a company. A company is a separate legal entity, and its shareholders are not liable for its debts.
Other key characteristics of a company include:
- You can choose to be a company director
- A company can trade anywhere in Australia
- Has a lower tax rate than the highest tax bracket for individuals
- Opportunity to attract investors and limit your personal liability
- Different reporting, tax and legal obligations.
If you’re set on changing your business structure to a company, let’s look at the next steps.
Why should you transfer your business name from sole trader to company?
It’s not uncommon for sole traders to wish to use their existing sole trader name as their company name if they choose to expand to a company structure.
Here are some reasons why:
- Easy to recognise – Your current business name has dedicated customers
- Your customers will be able to identify your company
- Keeping the same name will build a reputation for your company
- Builds your customer base
Frequently Asked Questions (FAQs)
Why would someone choose to transfer their business name?
You will have to transfer the business name when you sell your business. The business’s name is often associated with goodwill since clients recognise and associate you with that name. Goodwill usually accounts for a large portion of the sales price.
Almost all sale of business contracts will include a clause regarding the business name and require you to obtain an ASIC key if you haven’t already done so. It’s part of the transfer process.
What is the difference between an ACN, ABN, ABR and a business name?
An ACN or Australian Company Number is the unique number you receive when registering your company. This will enable you to obtain your ABN.
An ABN or Australian Business Number is an 11 digit number that identifies your business to the government and the community.
The Australian Business Register (ABR) stores business and company details.
A business name is a name under which you conduct your business. Lawpath can assist with a business name registration.
Next steps
Changing from a sole trader structure to a company structure is very exciting!
Congratulations on making this big step. If you have any difficulties in the process, the Lawpath lawyers can make this transition a smooth process so you can focus on flourishing your new company.
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