It is quite a common occurrence in the UK for Limited Companies to adopt a “trading” name to run their business with. Having already set up a limited company and registered with Companies House with one name they find that they would rather run the business under another name. In some instances, a limited company may well run multiple businesses, with various different “trading” names, yet all under the umbrella of the same company. There are, or can be, a number of issues to consider when contemplating such a thing.
First of all, The Business Names Act 1985 imposes certain legal requirements on companies adopting this business technique. The most obvious point is the trading name cannot be the same as or similar to another company or business name in a way that might be confusing. In the same way that you cannot register a company name with the same name as a company that is already registered, you cannot register one company name (which is completely different) then use a trading name which is the same as a already registered (and trading) company name.
Secondly, the use of sensitive words is prohibited/regulated in use as part of a trading name in much the same way as it is for limited company names. So using words like “association”, “group”, “federation” and similar words is prohibited. Clearly, a company cannot use the word “limited” as part of its trading name as this implies registration of a limited company under that name.
Thirdly, if using a trading name as part of carrying out business, a company is required to display the appropriate information in all places where the business is carried out and on all documentation, invoices and alike. So for example, if ABC Limited is trading as XYZ, then they must make as much clear on a notice at their premises, on paperwork and website displaying – “ABC Limited trading as XYZ“.
The Pitfalls of “Trading As”.
The use of a trading name might seem appealing to most businesses as it is easier than registering a company under the new name. However, there are several pitfalls. The whole area of “trading as” is rather a mine field.
It’s clearly important to carry out a company name search to ensure that the trading as name is not already registered as a limited company. Sensible business people would also carry out other searches in local business directories, on the internet and in the phone book to make sure they are not going to step on anyone’s toes. Because a trading name is not registered as a limited company, it is not properly protected. There is always the danger that at a later date someone else may register the trading name as a limited company and then stake their claim. This could clearly cause complications for your business as they will have the right to the name and therefore can force you to stop using it. So it is advisable to carry out a company formation and register the trading name as a limited company, then keep that company dormant. This might seem to defeat the point in using a trading name, but because a dormant (non-trading) company is just that, the registration is low cost and maintenance is straightforward.
The other obvious danger is that someone else has the trading name registered as a trade mark. This could lead to costly legal battles and a headache for the company. It is advisable to carry out a trade mark search and a trade mark registration with regards to the business trading name, both in order to protect it from use from others and to ensure it has not already been registered.
This article is not meant to be comprehensive legal advice, the law is subject to change and is complex in nature with regard to trading names. Please consult a legal professional for full advice.