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Business Names, Company Registration

The differences between businesses and companies

A huge thanks to Gosia Slotala from Shelcom Corporate Services for today’s article!

We often hear the two words: business and company used interchangeably. Anyone carrying on an activity that earns them a profit is doing business or running a business, and perhaps this is why there is a misconception that business and company is the same thing. To most people, it is the same thing, but in fact there are major differences between a company and a business.

In casual conversation it’s certainly acceptable to switch back and forth between the two terms as no one would really notice or put much weight to the words.  Conversely, for a new entrepreneur just starting out in a venture (or adventure of a lifetime), knowing the difference between setting up a business and setting up a company is crucial.  When referring to setting up a business or setting up a company in relation to establishment or incorporation, one must know exactly what stands behind the terms.   The core difference comes down to the legal and financial structures.

The structure of a business is relatively easy to set up and doesn’t involve much money or paperwork. The structure is simple and this is why most entrepreneurs starting out choose to register a business.  To register a business, to register a business name or to register a trading name is all the same thing. Currently in Australia business names are registered on a state by state basis, however this system is due to change on 28 May 2012. Read more about changes to the business name registration system here. When a business is registered in a particular state a unique nine digit Australian Business Number ( ABN) is given by the government which will help the Australian Tax Office (ATO) and other government organizations identify the business for tax and other purposes.  A registered business name is only reserved in the state of registration, which means that if someone in a different state wants to name their business the same as yours, they are legally entitled to that name. Therefor, if you want / need country wide recognition, registering a company would be a better option (at least until 28 May 2012).  A business name structure does not separate the business entity from the owner, which means that the owner of the business is responsible and liable for all debts incurred by the business.  If the business acquires debts the creditor or creditors can go after your personal possessions.  A business structure does not allow for corporate tax rates. The proprietor is personally taxed on all income from the business.

A company on the other hand, is a separate legal entity and provides for limited liability as well as corporate tax rates.  A company structure is more complicated and expensive to set up, but offers more protection and benefits for the owner.  When a company is registered, the Australian Securities and Investments Commission (ASIC) assigns a unique Australian Company Number (ACN) to the company. Similarly to the ABN, an ACN allows government bodies to differentiate it from other companies in Australia.  The company name is also automatically registered with Australia wide recognition. This means no other business in the country can use that, or a name which is too similar (ASIC is the agency which decides what is or isn’t too alike). The structure of a company is more complex than a business structure. A company must have a director or directors who run the company and shareholders who own the company. The owners are not personally responsible for any debts the company bears, the debts remain the responsibility of the company.

Many people choose to run a business over a company as there is far less government regulation involved, however if the company expands and profits increase substantially; asset and liability protection may be needed and tax incentives may become necessary.  If your business is small and there are no plans for major expansion or growth a business structure may be just right.

It is always advised that you speak to an accountant, lawyer or accredited advisor before making a business structure decision.  Choosing the wrong business structure can be a very costly mistake.

For a bit of guidance please take 60 seconds to fill out the free business structure wizard. It will help guide you in the right direction based on your particular circumstances.

Free Business Structure Wizard

If you are ready to register or incorporate follow the links below:

Register Business Name

Register Company

Author: Gosia Slotala
Shelcom Corporate Services
Shelcom has been helping Australian set up businesses and companies since 1987!
Phone 1300 722 796
Email companies@shelcom.com.au
Web www.shelcom.com.au
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About Jacqui Pryor

I've worked in the area of trademark registration for about 13 years now and am passionate about 'brand protection'. Starting my own business offering trademark services seemed the natural thing for me to do! I am able to assist businesses from 'start to finish' with registering their trademarks and offer advice and support for just about anything relating to their trademarks. Our services are affordable, and we hope you will find us friendly, approachable and professional.

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4 thoughts on “The differences between businesses and companies

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Jacqui Pryor, Director Mark My Words Trademark Services Pty Ltd

About Me

Hi! I'm Jacqui Pryor, author of this trademark blog and director of Mark My Words Trademark Services, which provides specialist services in the area of Australian trademark registration as well as international trademark registration. I hope you enjoy reading. If you'd like to know more about me, please click here.

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