Embarking on a business venture involves a plethora of terms and legal concepts. To help you understand these better, we present a concise guide to some essential business terms you’re likely to encounter.
Australian Business Number (ABN)
An ABN is a unique 11-digit identifier for businesses in Australia, issued by the Australian Taxation Office (ATO). It's necessary for tax returns, opening a business bank account, and appearing on invoices. An ABN is also required for Australian business licensing. Namecorp simplifies the ABN registration process with an easy application service.
Australian Company Number (ACN)
An ACN is a 9-digit number assigned to companies by the Australian Securities and Investments Commission (ASIC). It's crucial to distinguish between a business and a company, as they have different structures and legal implications.
Sole Trader
As a sole trader, you are the individual owner of your business but can hire staff. You bear full responsibility for all decisions and losses, and your business income is reported on your personal tax return.
Partnership
A partnership involves you and your partners running a business together, sharing income, losses, and control. The partners are not considered employees, even if the partnership employs staff.
Company
A company is a separate legal entity from its owners, with shareholders and directors. Profits and losses belong to the company, which can employ staff.
Trust
A trust operates with a trustee managing business activities for the benefit of others (beneficiaries). The trustee handles tax returns, income distribution, and debt payments.
Superannuation
Superannuation is a mandatory pension scheme, where businesses pay superannuation contributions for their employees.
GST (Goods and Services Tax)
GST is a 10% tax on most goods and services in Australia. Businesses exceeding $75,000 annual turnover must register for GST. Namecorp can assist with GST registration as part of the ABN application.
Trademark
A trademark uniquely identifies a service, product, or brand, providing exclusive rights for ten years, renewable thereafter. It can be a name, color, logo, or any distinctive feature.
Business Name
A business name is what you trade under. Except for your personal name, all other names must be legally registered.
Domain Name
Your website's name and email address suffix, a domain name is vital for online presence. Namecorp offers domain registration and free website design.
Business Insurance
Various insurance types protect businesses against diverse risks:
- Public Liability Insurance: Covers injuries or property damage to third parties.
- Professional Indemnity: Protects against liabilities arising from professional errors.
- General Business Insurance: Covers business property losses.
- Business Interruption: Provides for unexpected trading halts.
- Management Liability Insurance: Shields against mismanagement risks.
- Cyber Liability Insurance: Offers protection against digital data breaches.
- Tax Audit Insurance: Covers expenses during audits or investigations. Namecorp members get discounted insurance through partners.
Liquidation
Liquidation involves converting a company’s assets into cash to settle debts during closure or deregistration. A liquidator oversees this process.
Bankruptcy vs. Liquidation
While liquidation pertains to companies, bankruptcy applies to individuals, including sole traders and partnership members.
Voluntary Administration
This involves appointing a professional to help financially troubled businesses, potentially leading to either recovery or liquidation.
