Company Name Vs. Trading Name
When starting a business, you’ll spend a lot of time coming up with the perfect name – and understandably so. Your business name is the cornerstone of your brand and helps you stand out in the crowd.
But, did you know that the name you chose may not end up being the same name your business is known by? Yes, you can register one business name with Companies House in the United Kingdom but trade under a completely different name.
And this brings us to one of the most important topics for new businesses: company name Vs. trading name. This post will discuss the difference between the two and why each is important for your business.
Let’s get started!
What is a company name?
You create a limited company after registering your business with Companies House. A registered company name shows investors and potential customers that you are a legitimate operator.
You can only register your business with a unique company name that any other business has not used. A unique name is important in creating an identity among competitors and generating customer attention.
The Companies Act 2006 demands that your business name meet the following conditions to be registered with Companies House:
- The company name should not include any sensitive expressions or words unless the words have prior approval
- Your company’s name should not be the same or too similar to the name of another registered firm
- Your company’s name must not contain certain characters, symbols, or punctuations
- Your business’s name must not indicate or give a false impression that it’s connected with HM Government or any public or local authority
- The business name should have an appropriate ending (i.e., Plc, CIC, Ltd, etc.). This helps people identify your business’s structure and inform the public about the stakeholding pattern.
- You must include a postal address where your business is registered. The address will be in the public domain. If you don’t want to use your home address have a look at our Virtual Office service that we provide. https://clydeoffices.co.uk/glasgow-mailing-address/glasgow-registered-address/
Note: Sensitive words are terms or phrases that could be politically offensive. They include terms like ‘Trust’, ‘Royal’, or ‘Association’ and often imply that your firm has a specific special status.
Once you have an appropriate name to register your business, you should cross-check any duplication before applying the name through a registration process. Once the name is registered, you are legally liable to disclose the name and official address. The company name should appear on your company’s official website and in official documents.
What is a trading name?
A trading name is an unofficial and unregistered name that a business, company, or partnership may use at any given time. You are allowed to use as many trading names as required, but the names can’t be registered as official names of the company.
And while using an unregistered trading name is free, it presents your business with several potential risks. Registering your company’s name with Companies House is protected by law, meaning no other firm can use this name. On the other hand, the trading names do not have this level of protection.
Most companies in the U.K. have a trading name for their business. This is a different name from their company’s registered name. Some limited companies even run their businesses with several trading names. Partnerships and sole proprietorships are also allowed to use trading names.
Note: Several companies with unique company names can have the same trading names.
Company name Vs. trading name: the benefits
Many U.K. firms like to use a trading name despite the risks and potential restrictions that come with these names. This is because a trading name provides your business with some benefits. For instance, using trading names to run several businesses under one company can save you money and time with administration and secretarial work, such as annual accounts and filing confirmation statements. You only need to file these documents in the registered company’s name.
A trading name can also come in handy when looking to differentiate several sections of your business. For example, the firm you have registered with Companies House may offer web design services, but you also provide graphic and logo design. In such a case, you can use different trading names for each service, making it clear to your potential customers the services you provide.
A trading name can also be beneficial if it matches your website domain. This is especially useful when your registered company’s social media profiles and domain name have already been taken. In such a case, you can choose a trading name that matches your website, social media profiles, and brand name.
Company name Vs. trading name: the drawbacks
As mentioned above, it’s possible to run your registered company’s business as a limited company and use several trading names. However, the situation can become a problem, especially when company names overlap at any given point.
Here are some of the drawbacks of using a trading name for your business:
- The biggest drawback of using a trading name is that you always risk having another business register your name for their business with Companies House. This can disrupt your business and even damage your reputation, should the other business engage in unethical practices.
- You also risk losing potential customers, especially when you deal with the same products or services as the newly registered company.
- Failing to conduct thorough searches for trademarks and company names before choosing a trading name risks legal action against you.
- If your trading name resembles another business’s company name, you risk being accused of ‘passing off’ your business as theirs.
You need to be extra careful when choosing a trading name for your business to avoid unnecessary harassment and potential financial threats. As a business owner, you must avoid possible cases of trespassing.
Also, to protect your business, you should use your company name as the trading name and register the trademark. This way, you can be sure that both your company and trading names are protected.
The bottom line
Name is the most vital aspect of any business identity. It’s a steady and reliable tool for establishing your brand in the market. You can register your business using a unique company name to protect your brand reputation and customer base. You may also have a trading name that identifies your business in the market.