Unincorporated businesses like sole traders and general partnerships have limited protection with regard to their chosen business name. Whether they are using their own given name(s) or a trading name, anyone else can set up a business and trade under the same name(s).
The law of passing off can offer some assistance, and registering a trade mark (see below) provides more comprehensive protection; however, it is more common for businesses to form a limited company to protect their chosen name.
What is passing off?
The only form of automatic protection available for unincorporated businesses relating to their names lies in the law of ‘passing off’. The way it works: If one business (X) is established and has generated a certain amount of ‘goodwill’ (i.e. brand reputation, alongside customers who trust the business, etc.), a new business (Y) should not be able to pass itself off as X (e.g. by using their name). This is particularly true for competing businesses that operate in the same sector with the same potential customers.
So, if X sells apples and trades under the name ABC, Y should not attempt to trick customers and gain market share by calling itself ABC and also selling apples. However, Y can legitimately trade under the name ABC if it sell oranges because it would be difficult to argue that Y is stealing the goodwill of X.
The law of passing off is complex and often unsatisfactory, as it’s not always easy to prove the intention to steal goodwill. Therefore, unincorporated businesses wishing to gain more protection for their business name will often decide to form a limited company.
How does setting up a limited company protect my business name?
Registering a company name at Companies House means that the chosen name cannot be registered by any other business, but there are various company name rules that you will need to comply with (e.g. it must not contain sensitive words, and it must include “Limited” or “Ltd” at the end).
Crucially, for the purposes of protecting a business name, the chosen name cannot be exactly the same as another company name. Even if the name is slightly different, it may not be permitted if it is deemed to be too similar to another name:
- ‘Same as’ name – this is where the only difference to an existing name is: (i) certain punctuation or special characters or (ii) words or characters that are commonly used in company names or similar in appearance or meaning to those in an existing name.
- ‘Too like’ name – if someone complains that a chosen name is too similar to an existing company name, Companies House will make a decision. If it is deemed to be ‘too like’ an existing name, the newly registered name may need to be changed.
To protect a business name, you can form a limited company through 1st Formations using our Reserve a Company Name package.
Trade mark protection
Registering a trade mark is another way to protect a business name. A trade mark provides the owner with exclusive rights to market or sell goods and services using this trade mark, and the right to prevent others from using the same or similar marks to market their products.
A trade mark can be a business name, brand name, word, logo, font, colour, or a combination thereof. Registered trade marks in the UK are governed by the Trade Marks Act 1994.