ABN, ARBN, ACN, business name, incorporated, not-for-profit, charity, social enterprise –easing the confusion

Business by The Book is the business name and trading name for an entity incorporated as a (special purpose) proprietary company that is a not-for-profit social enterprise registered as a charity with charitable institution concessions. Take a breath. It therefore has an ABN and an ICN, but doesn’t need an ARBN.

That’s 12+ elements, but even without all these in play, starting and running a not-for-profit in our regulatory environment can be, apart from time-consuming, complicated and fraught with risks. So the following explanation should help. (It is an orientation, not legal or accounting advice tailored to your situation.)

The place to begin is with the ABN. For you won’t be able to go much further without one.  Everything you need to get one is here. To see whether you already have one, check via the ABN Lookup.

You can get an ABN either as an individual or as an organisation. Even as an individual, there will be, for accounting purposes, two entities. This means that the transactions of your business or enterprise are kept separate from your personal transactions. If there’s just you then although you are the sole owner, you wear two hats, one business and one private. And one will trade with the other, and each needs to keep separate records of such transactions.

If these transactions result in a profit (or surplus if you like), do you want to be able to distribute your surplus or profit to individuals or companies? If so, then you will have to pay tax. To avoid that you will need to meet the ATO’s (Australian TaxationOffice)definition of ‘not-for-profit’, which basically means putting clauses in your constitution forbidding such profit distribution, both while the organisation exists and after it dies.

(You’ve probably heard of the ACNC, the Australian Charities and Not-for-Profits Commission. Yes, they were set up to cover not only charities but also not-for-profits. But they haven’t got beyond charities yet – and, given the recent Senate review, may never do so.)

To be a not-for-profit you will need what the ATO calls a ‘legal structure’. This doesn’t include individual status though – you will need an organisation. This organisation can either be unincorporated or incorporated. “Incorporated’ means that you have sought, under a particular Act of Parliament, an identity separate from yourself and any other owners. For a not-for-profit, either an association under State/Territory legislation or a company under Commonwealth legislation is the usual choice. Companies are divided into proprietary (private) and public, and then there are further subdivisions.

To investigate incorporation as a company you need the ASIC (Australian Securities and Investments Commission) site, specifically this section.To see whether you are incorporated or not, search the ‘Companies & organisations’ register at the bottom left of the same site.

As a company, you should have an ACN (Australian Company Number). If you are an incorporated association and you trade outside your home State/Territory then you also need to register with ASIC. You will then be issued with an ARBN (Australian Registered Business Number). Check your record at www.asic.gov.au to see if you are so registered.

As a not-for-profit organisation, you may also be a social enterprise. But then again you might not –

Social enterprises are organisations that:

• Are led by an economic, social, cultural, or environmental mission consistent with a public or community benefit;
• Trade to fulfil their mission;
• Derive a substantial portion of their income from trade; and Reinvest the majority of their profit/surplus in the fulfilment of their mission¹.

The converse is that being a profit-distributing organisation, although making you ineligible for not-for-profit (and therefore, as we see below, charity) status, you could still be a social enterprise.

But you couldn’t take the next step and become a charity. Only not-for-profits can be charities. But not all not-for-profits can be a charity, only those whose purposes (other than those that are ‘incidental or ancillary’) are ‘charitable’. There are twelve such purposes under the Charities Act 2013 (Commonwealth), plus a few common law ones that continue. The best way to see whether your purpose, and other plans, qualify for registration is to answer the questions under ‘Register my charity’ on the ACNC’s site.

To check the charity status of any organisation, use the Find a Charity tab.

A charity doesn’t have a separate registration number – the ACNC uses the charity’s ABN.

That only leaves ‘trading name’ and ‘business name’. ‘Trading names’ are now only used by the ATO, updates will not reflect on the ABR (Australian Business Register), and such a name is not necessarily a registered business name.

If you want to trade under a name different to the legal name of your organisation, then you will need to register that name as a ‘business name’. ASIC took over business name management from the states and territories a couple of years ago. For everything official about business names, including to check whether you have a business name, go here.

The nature of Business by The Book’s business, and a turnover below the limit for organisations, means that it has chosen not to register for GST. If that’s not you then the ATO site is the one you need, but you’ll need an ABN first. And if you want to check to see if you are already registered put your ABN in the box in ABN Lookup.

Having completed the tour of Business by The Book as our example of regulatory compliance, you can see why we’re now off to check the diary to see what’s due for renewal.

¹Finding Australia’s Social Enterprise Sector: Final Report, Barraket, Jo Nick Collyer, Matt O’Connor and Heather Anderson, Australian Centre for Philanthropy and Nonprofit Studies, June, 2010.