Business name or trading name: which should I use?
The name of your business is a key part of your brand and identity – it’s displayed on signs and paperwork, it’s promoted through your advertising and marketing, and it’s stated on all of your financial reports and tax returns.
When limited companies incorporate, they’re required to register an official name with Companies House; however, they also have the option of trading under another name. But why would your business use two different names, and what are the pros and cons of doing this? Here’s what you need to consider when using a trading name.
Differences between a business name and a trading name
A business name is the name you’ve officially registered with Companies House. Business names need to meet a few requirements, and they cannot:
- Be offensive
- Be the same as an existing registered name or trade mark
- Suggest a connection with the government or local authorities
It’s also usually required that company names include end in ‘Limited’ or ‘Ltd’ (or the Welsh equivalents, ‘Cyfyngedig’ and ‘Cyf’).
On the other hand, your trading name is the name that your business uses on a day-to-day basis. Your trading name needs to meet the same requirements as a business name, but it doesn’t need to be registered with Companies House.
Bear in mind that the rules for sole traders and partnerships are slightly different. Sole traders and partnerships don’t need to register an official business name with Companies House, and they can trade under their given name instead of a business name.
Reasons to use a trading name and a business name
The most common reason to use a trading name is simply personal preference. Ideally, you would choose the right name for your business when you first register your company name, but it isn’t uncommon for business owners to change their minds a few years down the line and decide they’d rather go by something else.
Another common reason businesses trade under a different name is if they’re part of a larger company. For example, a limited company owns several different businesses that are managed independently, but are legally part of the larger company. The limited company is registered under an official business name then each branch has its own trading name to distinguish it from the other branches.
When to use business names and trading names
Companies are required to display their business name in a few different places, including:
- On their website
- At any location where the business operates (unless you work from home)
- On any correspondence and paperwork, such as invoices
If you use a trading name, you’ll need to display both your business name and your trading name in each of these place. The most common way to do this would be to use the phrase “[business name] trading as [trading name]”.
When you run a limited company, you’re responsible for submitting a number of different tax returns; when you do this, it’s important that you use your official business name instead of your trading name, as this is the name HMRC will have on record.
Should I use my business name or a trading name?
Whether you should use a trading name or stick with your original business name is a big decision that can affect your company in a number of different ways. If you’re considering using a trading name instead of your business name, there are a few important things you’ll need to take into account.
Will my customers get confused?
Adopting a trading name after a few years of running your business could be a good business decision, but it's also likely lead to some initial confusion among your existing customers. Be prepared to answer questions about why you’re using a trading name, and communicate clearly that your business will remain the same despite the apparent name change.
Will it harm my company’s reputation?
Business owners work hard to establish a strong brand and reputation. If people can no longer identify your brand due to a change in name, adopting a trading name could have a negative impact on any goodwill you’ve built up over the past few years, so spend time assessing whether adopting a trading name is worth the potential risks.
Can I afford to change my name?
When you start trading under another name, you’ll need to make sure that your new name is displayed everywhere it needs to be – this might mean purchasing new stationary, getting new signs made, or editing your website and social media to reflect your new name. These changes will obviously come at a price, and the costs will quickly start to add up.
Think about whether you can actually spare the money – and time – you’ll need to make these changes. If you’re still struggling to pay your bills and cover your other expenses, it might not be wise to invest in a name change until your finances are a bit more stable.
Are both of my names protected?
When you register a business name with Companies House, other businesses are prevented from registering under the same name. However, this doesn’t mean that your business name has any other type of legal protection, so it’s common for businesses to also register their business name as a trade mark. After applying to register for a trade mark, you can:
- Take legal action against anyone who uses your name without your permission
- Use the ® symbol
- Sell and license your name
If you decide to use a trading name, you need to make sure that the name you choose isn’t a registered business name – but, because you can’t register your trading name with Companies House, you might want to consider how you will prevent other people from using your trading name, and this usually involves registering yet another trade mark.
Should I change my name officially?
If you’re seriously considering using a trading name, you might also want to consider whether you should actually change your official business name. The process of changing your official business name is a bit more complicated than just adopting a trading name, but it might pay off in the long run.