What’s in a name? Who owns the name of a business?
When you buy a business, do you buy its name? The reasonable assumption would be that, yes, you have bought the name of a business. However, this is not always the case, especially within the hospitality industry, where a business may have existed in a building for decades with numerous business owners but the same landlord.
The answer is all in the fine print, and fine print is called that for a reason: nobody wants to really read it.
It is a common misconception for new business owners that they do not need legal representation when buying a business, believing themselves to be capable enough in signing the relevant documents when buying a business. However, a solicitor as well as an agent/accredited business broker are fundamental in highlighting concerns you may not have considered, such as the true owner of a business name.
While some business owners may also own the building in which it is housed, those leasing the space need to do their research as to their rights when it comes time to selling or, more importantly, moving their business.
What do you do if you own a café that has existed in a building for 50 years, but the rent has been increased beyond what you are willing to pay and you want to move? Can you simply close shop and move it down the street? Not necessarily.
A landlord who owns a building in which a business has built a name for itself over a long period of time and in that exact building may make a claim that the business name itself belongs to them, unless stated otherwise in a contract of sale agreement.
What to keep in mind for your business name
- Be aware that business names have a time limit (usually three years), while domain names have a similar time limit (between one and three years). It is up to you to make sure you register your business name with the Australian Securities & Investments Commission (ASIC).
- There are no hard-and-fast rules regarding the issue of business names when the contract fails to stipulate the rights of the owner to relocate a business, or change the business name. Each case is treated separately.
- Make sure you go through the contract of sale with a solicitor to highlight your rights regarding ownership, management, fees etc.
- Ensure the contract addresses ownership of the business name, and the right of that business owner to move the business from the premises. Simply stating who the owner is may not be enough if the business has been affiliated with the building for a significant period of time. A landlord may argue that the public affiliate the business with its location, and separating the two would be financially detrimental to landlord. It is a stretch of an argument, but it may cause delays in your plans as well as legal costs. To avoid the headache, make sure you have the explicit right to relocate the business if you wish.