Businesses which have not been incorporated (e.g. sole traders and partnerships) have limited protection in respect of their business names. Whether they are using their own 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. Many businesses also decide to form a limited company to gain more protection for 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 themselves off as X (e.g. by using their name). This is particularly true for businesses which are rivals and operate in the same sector with the same potential customers.
So if X trades under the name ABC selling apples, Y should not attempt to gain market share by calling themselves ABC and selling apples too, if their aim is to make customers believe they are in fact X. However, Y can legitimately trade under the name ABC, if they sell oranges, as it would be difficult to argue they are 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 with Companies House means that this chosen name cannot be registered by any other business. There are various rules concerning the choice of a company name (e.g. it must not contain sensitive or offensive words, and it must include “Limited” or “Ltd” at the end).
Crucially, for the purposes of protection of business names, the chosen name cannot be exactly the same as another company name. And even if the name is slightly different, if it is deemed to be too similar to another name, it is still not permitted, e.g. in the case of:
- ‘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 which are commonly used in company names or which are similar in appearance or meaning to those from an existing name (and therefore make it too similar).
- ‘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.
Click here to reserve a business name by forming a limited company with 1st Formations.
Trade mark protection
Another form of protection is to register a trade mark.
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.