One of the most important decisions to make when setting up a new business is which company name to use to reflect your brand and product offering. Businesses in the UK often have both a company name and, also, a different trading name under which they operate. Using a trading name, or even several trading names, can offer a number of key benefits. In this article we will explain the differences between a company name and a trading name, why companies use trading names and the rules about the use of trading names.
What is a company name?
When a company is incorporated at Companies House it will be registered with a company name. This is the official and legally registered company name of a business entity. A strong company name will tell potential clients what the business does and create a strong brand identity. Registering a company name also provides important legal protection by preventing others from using the same name.
Depending on the type of company, company names end with the word or letters “Limited”, “Ltd”, “LLP” or “PLC”, e.g. ABC Widgets Ltd. “Limited“, sometimes abbreviated to “Ltd“, means “limited company” and is used by companies that are limited either limited either by shares or by guarantee. LLP stands for “limited liability partnership”. PLC stands for “public limited company”.
As explained in this article, one must adhere to a number of rules and restrictions on the use of company names. Once a company name is registered it is placed on the official and publicly available register of companies.
All companies (unless dormant since incorporation) are legally required to display a sign with their registered company name at their registered office, inspection place and any location where they do business (unless it is mainly used as living accommodation). The name must also be used in all business communications, whether hard copy or electronic.
What is a trading name?
Companies may choose to operate under a different trading name (sometimes called a “business name” or known as “trading as”) or several different trading names, rather than their official company name. A trading name is therefore a secondary name under which a business operates. Using a trading name allows a company to operate under a different, often more market-friendly name without changing its legal name or structure. Trading names in the UK are commonly used for the purposes of branding and marketing to promote specific products or services. Unlike the company name, registering a trading name is not a legal requirement.
Trading names are often used by companies to run separate divisions or product lines. For example, “ABC Vehicles Ltd” may trade as “ABC Cars”, “ABC Vans” and “ABC Buses” from a client-facing perspective. In many cases it may be the trading name with which customers are most familiar, rather than the company’s registered name. One example of this is Kingfisher Plc, which operates under the well-known trading names B&Q and Screwfix. Other examples include Tesco Plc, which owns the trading names Tesco Bank, Tesco Mobile and Booker. In these examples the official company names registered with Companies House are Kingfisher Plc and Tesco Plc. Any business which says that it is “trading as” or shows the letters “T/A” is using a trading name.
Trading names are not registered in the same way as company names, although a number of rules must be followed – as explained below.
What is the difference between a company name and a trading name?
The main differences between a company name and a trading name are as follows:
- A company name is the official, legally registered name of the company, whereas a trading name is a secondary name used on a day-to-day basis for the-or-a-business that is run under the company.
- Trading names are used primarily for marketing and branding purposes.
- A company name is legally required when registering a new company with Companies House, whereas trading names are entirely optional and do not need to be registered.
- Trading names can be used immediately (as long as the naming rules and restrictions have been met), whereas company names must be registered before they can be used.
- Customers often recognise the trading name more than the company name.
Why use a trading name?
Companies use trading names for many reasons, including to make it easier for customers to understand what they do. If a large holding company has several products, services and brands then using the original company name may confuse consumers. For this reason the company may decide to operate under a number of trading names that convey what each brand does. For example, a furniture company may have one trading name for office furniture, another for commercial customers and another for home furniture.
Trading names also help companies to grow and expand into new markets. For example, a company may originally have been formed to provide only one product but it may then widen its offerings over time. For such companies, using trading names can be extremely valuable in conveying their new and/or varied offerings to consumers.
Another benefit is the reduced amount of administration. By using trading names, administration and filing with Companies House and HMRC can be done at the level of the company. This is because there is no need to file separate accounts and documents for each brand or trading name, since they are all under just the one company.
What are the rules for choosing a company name?
It is important to choose a company name carefully because there are certain restrictions that must be adhered to. A company name cannot be the same as or too similar to another registered company or registered trademark. A company name cannot be offensive or contain sensitive words or expressions. In addition, a company name cannot imply a connection between the company and the government, a local authority, or a public authority.
It is important to bear in mind that when determining whether two company names are the same, Companies House will ignore the following:
- The company’s status
- The word “the” or “www” at the start of the name
- Certain characters (e.g. the plus sign)
- Words or characters that are similar in appearance or meaning to another from the existing name and
- Words or characters used commonly in UK company names
An application to change an existing company name using any of these methods (e.g. changing the spelling of a word or adding a symbol) is likely to be rejected by Companies House.
What are the rules for choosing a trading name?
As with company names, there are certain rules on the use of trading names. It is important to bear these restrictions in mind when choosing a new trading name. Part 41 of the Companies Act 2006 sets out the provisions on business names. Specifically, trading names must:
- Not include a suffix used for company name registration – this includes limited company (Ltd), limited liability partnership (LLP) or public limited company (PLC)
- Not include sensitive words and expressions. In some cases, it may be possible to gain permission to use sensitive words and expressions
- Not be the same as an existing registered trade mark
As with company names, it is advisable to conduct thorough research also when selecting a trading name. This may involve searching the internet, checking domain registries, reviewing trade journals or magazines and consulting the trademarks registry to ensure that no other business has already adopted the chosen name.
If you have chosen to use a trading name then it is still important that you publish your company’s name and details on your website, correspondence, and invoices and receipts. Looking at an example given earlier, ABC Vehicles Ltd might use “ABC Cars” as one of its trading names. Somewhere on the website and printed material that promotes the “ABC Cars” part of its business (and its stationery including invoices and receipts) it should therefore clearly say “ABC Cars is a trading name of ABC Vehicles Ltd” or else “ABC Vehicles trading as ABC Cars”.
Trading name sensitive words and expressions
Sensitive words and expressions that must be avoided (or permission gained) when choosing a trading name include any of the following: accounts Commission, accredit / accreditation / accredited / accrediting, adjudicator, association, assurance/assurer, audit commission, auditor general, bank, benevolent, Britain / British / of Britain / of Great Britain, charitable / charity/charities, chartered, commission, co-operative, council, dental / dentistry, duke/duchess, England / of England / English, federation, foundation, fund, government, Health centre / Health service, Health visitor, inspectorate, licensing, mutual, NHS, Nurse / Nursing, registrar, regulator, university and society. Please note, however, that this list is not exhaustive.
Using a sensitive word or expression without permission may be an offence and be subject to a fine. It is also important to check that the trading name does not infringe on an existing trademark.
If you want to use a sensitive word or expression then the rules state that you must obtain the written views of a relevant body and send this to Companies House along with a letter requesting permission.
Can a company enter into contracts under its business name?
Yes, a company can enter into contractual agreements using its trading name. Although trading names do not need to be registered with Companies House, companies must still adhere to the regulations on restricted or prohibited business names as set out in Part 41 of the Companies Act 2006 (see above).
As we have discussed in this article, companies can trade using their official company name as registered at Companies House or alternative trading names. If your company needs to reach new markets, improve its brand messaging or if the original company name is no longer relevant or useful then using trading names may just provide the answer you need.