7 Legal Pot-Holes to Avoid in Start-Up #3 - Business Names - who are you really doing business with?

We’ve started noticing lately a lot of contracts that clients have with their customers having business names on them instead of the correct legal entities – the danger being that the invoices addressed to them are ultimately unenforceable.

Invoicing is arguably one of the most important functions in your business, second only to collecting on your invoices.  So it’s crucial to get it right.  Have you ever stopped to consider who you are addressing your invoices to?

It’s a fairly understandable mistake to make, as business names are regulated by ASIC, and you’ve usually got an ABN associated with it.  However, the fact is that business name is not a legal entity, but is owned by and registered to a legal entity, which will in most cases either be an individual or incorporated entity like a Pty Ltd company.  Other legal entities might include a partnership, or an incorporated association.  Think of a business name like a nickname – something one is known by, but definitely not formal enough for naming in a contract or an invoice.

Problems can arise when you have contracted with, and issued invoices to, a business name instead of the correct legal entity.  For example, you can’t sue a business name in court proceedings to enforce money owed to you.  You can only sue a legal entity.  So, make sure that all your back up documentation is correct, and that your invoices are addressed to real entities and not “men of straw”.  If your contract or invoice is in the name of or addressed to a business name, and there is a dispute, it is ultimately unenforceable.  It may be possible to rectify your documentation, but it can be costly and cause delay, so it pays to make sure it is right from the start.

If you are dealing with a company and a business contract, make sure to obtain their full Pty Ltd name and ACN. Check it with ASIC online (www.asic.gov.au) and go into ASIC connect – it takes 10 seconds and is easy to do. Where possible, it’s also recommended to have directors named on contracts so that they are personally liable also. We will be going into this in more detail in the next few months. 

If you have any questions about a business contract or any aspect of knowing your client, or if you need help making sure that all your client engagement and invoicing documentation is enforceable, talk to us at Progressive Legal.

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Want to secure the future of your business today? Get in touch with Progressive Legal for honest and affordable legal advice. We are personal, accessible, approachable, transparent and passionate. We aim to be your long-term advisor not just a transaction like the traditional law firm. 

This article is meant to be informational only and should not be taken to constitute legal advice. Specific legal advice should be obtained for each individual business to make sure it is correctly applied.

Ian Aldridge
Principal Lawyer
Progressive Legal - Law for Entrepreneurs
[email protected]
www.progressivelegal.com.au