ABN, business name and structure for dropshippers

Before you list your first product, it is worth getting the basics right. An Australian Business Number (ABN), a registered business name, the right business structure and some thought about your brand all make it easier to open accounts with suppliers and platforms, invoice correctly, claim expenses and look professional to customers.

None of this is complicated, but the rules have some traps. This guide explains what each registration is for, when you need it, and where to find the official information. It is general information, not legal or tax advice. For your own situation, speak to a registered tax agent, accountant or lawyer.

Business or hobby?

The first question is whether you are running a business at all. The ATO says there is no single test, but it looks at factors such as whether you intend to make a profit, whether the activity is repeated and regular, whether it is planned and organised in a businesslike way, and its size and scale.

For most people building a dropshipping store, with a website, paid advertising and a plan to grow, the answer is likely to be yes. That matters because a business:

• is entitled to an ABN;
• generally declares its income and can claim deductions;
• may need to register for GST;
• must keep proper records.

If you are not sure, the ATO's business or hobby guidance and a tax professional can help.

The Australian Business Number

An ABN is an 11-digit number that identifies your business to the government and the community. You apply through the Australian Business Register (ABR), and applying is free.

Why dropshippers need one

• Suppliers and wholesalers often ask for an ABN before opening a trade account.
• Platforms and payment providers may ask for business details during verification.
• Invoices: if you register for GST, your tax invoices must show your ABN.
• Business names: you need an ABN to register a business name with ASIC.
• Domain names: an ABN is a common way to show the Australian connection needed for some .com.au domains.

No ABN withholding

The ATO explains that if a business pays a supplier who does not quote an ABN, the payer may have to withhold tax from the payment at the top rate (currently 47%). This mainly affects business-to-business payments. Having an ABN avoids it.

Applying

You apply online at the ABR. You'll need your tax file number and details about your business activity. Answer the questions honestly. Applications are assessed, and the ABR may refuse an application if you are not carrying on an enterprise.

Business names

When you need to register

ASIC explains that you generally need to register a business name if you trade under a name other than:

• your own personal name, if you are a sole trader (for example, "Jane Citizen");
• the exact name of your company (for example, "Citizen Trading Pty Ltd").

So if Jane Citizen wants to sell as "Coastal Home Goods", she needs to register that business name.

How to register

You register through ASIC's online services after you have an ABN. You can choose a registration period, and ASIC charges a fee. Check ASIC's website for current fees.

Choosing a name

• Check availability on the ASIC register and do a trade mark search through IP Australia.
• Avoid other people's brands. Using a name that is similar to an existing trade mark can lead to disputes.
• Check the domain name and social media handles.
• Think long term. A name tied to one product can feel limiting if you expand.

Trade marks

A registered business name does not give you exclusive rights to the name. IP Australia explains that a registered trade mark is the way to legally protect a brand name or logo for particular goods and services in Australia.

For dropshippers, trade marks matter in two directions:

1. Protecting your brand if you build a distinctive store name and logo.
2. Respecting other brands. Never list counterfeit goods or use another company's trade mark to describe products that are not theirs. Selling fakes can breach the law and lead to goods being seized at the border.

Choosing a business structure

Business.gov.au describes four common structures.

Many dropshippers start as sole traders because it is simple and cheap, then move to a company as the business grows. Changing structure later involves new registrations and possibly tax consequences, so get advice early if you expect to grow quickly.

Bank accounts and payments

Opening a separate bank account for your business makes record keeping much easier, even as a sole trader. It keeps supplier payments, platform payouts and advertising costs in one place and makes it simpler to prepare your tax return or business activity statement.

When choosing a payment provider, compare:

• percentage and fixed fees per transaction;
• currency conversion fees if you pay overseas suppliers;
• payout timing and any reserves held against refunds or chargebacks;
• dispute and chargeback processes.

Domain names

Many Australian stores choose a .com.au domain. auDA, which administers the .au domain, sets eligibility rules. For .com.au, you generally need an Australian presence and a connection to the name, and an ABN is one way to show your Australian presence. Check the current rules with your domain registrar.

Other registrations you might need

Depending on what you sell and where, you may also need:

• GST registration once your GST turnover reaches the threshold. See our GST guide.
• Licences or permits for some product categories. The business.gov.au licence search (ABLIS) helps you find them.
• Import permits for some goods, such as certain plant, animal or food products. See overseas suppliers and imports.
• Insurance, such as product liability cover. It is not always required by law, but it is worth considering.

Common mistakes

• Using a business name without registering it. If you trade under a name that isn't your own, register it.
• Assuming a business name protects your brand. It doesn't. Consider a trade mark.
• Mixing personal and business money. It makes tax time much harder.
• Paying for "free" registrations through lookalike sites.
• Copying a competitor's branding. It invites legal disputes.

Key points

If you run your dropshipping store as a business, apply for a free ABN through the ABR. Register a business name with ASIC if you trade under a name other than your own or your company's name, and remember that a business name does not protect your brand: a trade mark does. Choose a structure that suits your risk and plans, keep business money separate, and check whether your products need licences or permits.

Related guides

Read GST for online sellers, income tax and record keeping and what dropshipping is.