Understanding Correct Insured Names in Australia
Starting a business in Australia involves understanding several key concepts, including the differences between a business name, trading name, and legal name. It’s vital to understand the importance of correct insured names when completing an insurance policy application.
What is a Business Name?
Multiple business names can be linked to your Australian Business Number (ABN). ASIC makes it easy to register your business name online from their Registration Service Page.
What is a Trading Name?
A trading name is an older term referring to unregistered names used by businesses before the National Business Names Register was introduced on May 28, 2012.
To continue using a trading name, it must be registered as a business name. As of November 2023, only registered business names are displayed on the ABN Lookup and Australian Business Register.
What is a Legal Name?
A legal name is the official name of the entity appearing on legal documents such as insurance contracts, property leases, and registrations. The legal name varies depending on your business structure:
- Sole Trader: Can use the individual’s name as the legal name. This may also include the individual’s trading name (registered business name), if you have one. For example “Joe Smith trading as Joe’s Fishing Charters”
- Partnership: The legal name is the name of the partnership. This business structure consists of 2 or more people and can also have a trading name as with the sole trader example.
- Incorporated Association or Proprietary Limited Company: The legal name is the registered company name, e.g., XYZ Property Solutions Pty Ltd. This company can trade a XYZ Property Solutions however it may also decide to have a different business trading name associated with it. This different name would need to be a registered business name.
- Trusts: The name of the Trustee (either individual/s or a corporate trustee), the name of the Trust, and the business trading name will be used. For example “Joe Smith ATF The Joe Smith Trust T/AS Joe’s Fishing Charters” (ATF = as trustee for & T/AS = trading as).
Still wondering… Do I need to register my business name?
You must register a business name if you plan to trade under a name different from your legal name. For example:
- Sole Trader: Jane Smith wants her florist business to be known as Jane’s Flowers instead of her legal name.
- Partnership: Joe Smith and Sally Jones want their camping business to be known as “John and Sally’s One Stop Camp Shop” instead of their legal names.
- Proprietary Limited Company: If registered as XYZ Pty Ltd but trades as ‘XYZ Solutions,’ the business name ‘XYZ Solutions’ must be registered.
You do not need to register a business name if you are trading under your legal name.
How do correct names relate to insurance?
The most important part in an insurance policy, particularly any kind of liability policy, is to ensure the Insured name on the Policy Schedule is correct.
The Insured name MUST be a full legal entity of the party you are trying to insure. If you don’t get the Insured name correct, or the name you enter as the Insured is not a legal entity, then the insurance contract may not respond to claims.
Insurers can and will decline liability claims on the basis that the claim is not made against an entity listed on the schedule .
A statement of claim or writ will only ever be served against the legal entity, so for an insurance policy to respond the policy must be in the name of the correct legal entity.
- A business name is not a legal entity.
- A partnership is not a legal entity.
- A trust is not a legal entity (the legal entity is the Trustee).
If the business is conducted by a company, the legal entity will be the full company name including “Pty Ltd” (or any variation) at the end.
Having the correct insured name on your insurance policies helps protect your business. Talk to us today about ensuring you have the correct insured name on your insurance policies so you can focus on what you do be best, running your business. Contact us here today.
