Are you confused about the difference between a company name and a trading name? Read this blog to clear your concepts regarding the two
A firm has both the company name and trade name, the former is a name that is legally registered. Whereas, the trade name of a business is the name by which it chooses to be known by the audience. For instance, Walmart’s legal name is WalMart Inc. And its trade name is Walmart.
To legitimise business operation and validate service, a company must register its business. This authenticates its existence as a private limited company. It helps the company convince and attract potential investors. Simultaneously, it can help in gaining business.
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What is a Company Name?
A company must register itself with a unique company name. However, experts reveal that names should be unique and should not be used by any other business. A unique company name can help generate customer attention. Companies Act 2006 has specified that a business must fulfil the following conditions:
- A company cannot choose the same name or any name very similar to some other company. The given nomenclature should not be used by another business which has already registered itself.
- The company name must not be chosen to indicate or give a false impression to the customers. The brand name should not be related to or associated with local or public abuse. At the same time, a good brand name should reflect well with the government.
- When choosing a company name, a business must try to avoid any controversial or sensitive words unless they have already got the requisite permission from the concerned authority to do so. The terms considered offensive or may cause political disagreements are better avoided.
- The company name must have a proper ending – like Ltd, CIC, Plc. etc. This can identify the business structure and make the public understand the stakeholding pattern.
- The company name must not have some specific characters, symbols, or punctuation. Such an aspect needs to be avoided as it creates confusion in the customers’ minds.
- After finalising an appropriate name to register its business, the business should cross-check for any kind of duplication. If not, only the company can apply for the name through a registration process.
Experts agree that, although running a company is not easy, applying for registration of its name can be done relatively quickly. A business owner needs to follow a few steps to do so.
- A company registered with the is legally liable to disclose its original company name and official address. This should be carefully mentioned in the official documents. Such official documents include business letters, invoices, purchase orders, and even business licences.
- The company’s official website must mention the company name and official address. In most cases, the businesses like to display their trading name and address on their company letterhead. However, they are obliged to include the company name and official address at least in the header or footer of the letter as directed.
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What is a Trade Name?
A trading name refers to the unofficial and unregistered name that any business may be using at a given time. It is free to run its business operation using a trading name. However, several potential risks are involved for a company that uses an unregistered Trading name.
Registering business with Companies House ensures no other company can use the same name in the future. The company name is unique and part of its permanent brand identity. For trading names, a company can have multiple trading names.
Likewise, numerous companies with their individual and unique company name can have the same trading names whatsoever. Thus, the trading name is not the actual name. Instead, it can be considered a fictitious name under which a company is allowed to run its business without even registering itself with the Companies House.
It may so happen that a company cannot choose its preferred name while registering its business because some other business has already reported this name for itself. In such a case, many companies may like to use a separate trading name which is much easier to be remembered by the customers. At the same time, the name shall appear to be more appealing than its original name, or more precisely, the formal name. You Can get the Name For Company Online With the Advice of experts.
Potential Risks of Using a Trading Name
It is common for a registered company to run its business as a limited company and use multiple trading names. However, the situation can become problematic, especially if company names overlap at any particular instance.
- A new company decided to register its company name, which was long being used as a trading name of a different company. This cannot be treated as infringement, however. Because the trading name is not registered, it is not protected. In fact, in such a case, the registered company may demand other companies to stop using its registered company name
- If so happens, such company/companies with the same trading name have to give up the very idea of adopting the name. This is terrible news for the business. Because when a company has been running its business for quite a long time using the same trading name, it must have built up a customer base and brand recognition. Giving up that name means losing that potential advantage of customer recognition gained in the past
- Problems may also arise if the trading name is too close to someone’s company name. The latter can object and accuse the trading company of deriving undue and unfair advantages in such a case. This can also mislead the customers by stealing the business identity of other firms. If that be the case, it can seek prohibition for such an attempt of ‘passing off’ by the company with the same or similar trading name
- Under the legal provision, the registered company can thus accuse the trading company of infringing its trademark, a legal offence.
Thus, to avoid such unnecessary harassment and potential financial threats, companies need to be extra careful before using any trade name/s. The business owner should make sure they have avoided a possible case of trespassing. To protect its business from any such threat and avoid unnecessary embarrassment and harassment, it is always desirable and even advised to register the trademark and use a company name.
Conclusion
Name is the first and primary form of any business identity. Especially for businesses, it is a steady tool for establishing the brand in the market. No business can afford to lose as that will undoubtedly lead to losing the competitive advantage, besides customer base, brand reputation and many more.
Therefore, a company must register its business using a unique company name: https://www.mca.gov.in/content/mca/global/en/home.html and its trademark even though it is legally allowed to run its business under multiple trade names.
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