There is a lot of confusion out there about the difference between Business Names, Company Names and Trademarks.
Here’s what you need to know. Let’s start with the most obvious first question:
1. What’s the difference between a Business Name, Company Name and Trademark?
What is a Business Name? A Business Name is your trading name. If you are doing business under a name that is not your own personal name (e.g. Sue Smith) you are required to register your Business Name with the Australian Securities and Investments Commission (ASIC).
What is a Company Name? A Company Name does not necessarily need to be your Business Name. You can register your Company Name and operate under a registered Business Name. There are a number of types of company structures but a Proprietary Limited (Pty Ltd) is the most common for Company Name registration.
What is a Trademark? A Trademark is a way of identifying a unique product or service. To be official, a Trademark needs to be registered with IP Australia. You can Trademark your Business Name, your Company Name, your product or service brand name. In addition, you can protect your logo, tagline or number as part of your Trademark registration.
2. What type of name registration is best?
When operating your business, your major concern should be the protection of yourself, your personal assets and your business.
Trademark protection: A Trademark legally protects your Business Name against other businesses using it. Business Name registration and Company registration gives you the right to use the name itself but does not protect the right to do a particular type of business. Only Trademarking your Business Name will give you the registration protection from others copying your name and business activities. When you register a Trademark you get exclusive use of that Trademark throughout Australia and it is protected for an initial period of 10 years.
Pty Ltd Company protection: Registration of a Pty Ltd Company creates a legal entity, gives you the privilege of a company tax rate and limits the liability of company shareholders to the assets of the company. Your personal assets are not at risk in the event of any claim with a Pty Ltd Company, unlike a Business Name only or Trademark only registration.
Business Name protection: Many business owners often mistakenly believe that by registering a Business Name, their Business Name is a protected brand or trading name. Since 28 May 2012, Business Name registration does not offer this protection. Registration of a Business Name does not give you exclusive trading rights over that name and does not give you or your business any legal protection. You cannot stop someone from using your Business Name for their business, particularly if they are conducting different business activities. If you have only registered the Business Name with no company structure, you are likely operating as a sole trader so your personal assets are at risk in the event of any customer claims.
3. When should I consider registration of my brand name?
When starting your new business cash flow is key and you don’t want to waste money on unnecessary name registration. So what is the cost to protect your brand?
Cheapest option: Business Name registration. Business Name registration is the cheapest option for a business structure with Business Name registration and renewal at $35 for one year or $82 for 3 years. But remember, if someone Trademarks the name or brand before you do so, you may have an expensive opposition on your hands and you may lose the name altogether.
Most expensive option: Company Name registration. The only protection out of these business options for your personal assets is through a Pty Ltd Company registration. This can be a more costly option as you have on-going obligations once you are set up, with lodging of tax statements and audited account requirements but it provides the most protection for personal assets. However, just like Business Name registration, you could still lose use of your trading name if you do not register the Trademark. General company incorporation costs are around $660.
Recommended option: Trademark registration. You should consider Trademark registration at an early stage of your business. Having a Business Name or Company Name does not provide the protection for the business activities and your brand. Only Trademark registration does this. The application fee is $250 per class (or $330 per class for custom descriptions) and, once registered, your Trademark registration lasts for 10 years.
We hope this article clarified the pros and cons and major differences between Business Names, Company Names and Trademarks.