When you set up in business, one of the very first things you have to do is choose a business name. But what are the legal issues involved, how do you choose a good name – and how do you protect it?

Legal issues

Business names must comply with the law. This is consolidated in the Companies Act and Business Names Act of 1985 and amended or added to by various statutory instruments.

It is not now necessary to register a business name, but it is necessary to register a company name at Companies House. You will need to check whether someone is using the name already or something similar. If you intend to form a Limited Liability Partnership (LLP), the process is similar.

It is necessary to register your domain name and nowadays it is sensible to check, free of charge, whether your choice of name is being used by a company, an LLP or a dot.com. You may always trade under your own name. You may also trade under almost any other name as long as it would not be considered offensive or illegal. You are unlikely to be able to use a name that implies a connection with either the Government or a local authority. There are also around 80 words that require the agreement of the Secretary of State before you can use them. These include “British”, “Royal”, “National” and “English”.

As a company, partnership or sole trader, you are required to provide certain information on your business documents. For example, a limited company's name should appear on your website, headed paper, invoices, receipts and so on. Your business stationery must also contain your registered number and registered office address.

If you are a sole trader or partnership using a different trading name, you should put your name or names of the partners on your business stationery.

Similar names

A business’s name will come to stand for its reputation. This is why people go to great lengths to protect their name. You may therefore run into problems if your name could be confused with an existing business in the same area or line of business. This is known as ”passing off”. If confusion could occur, the other party could take you to court to make you change your name.

Also, a geographical description used in a business name acquires proprietary rights over a period of time, which can give the owners of the business name some protection against copying. Tower Tandoori, for example, successfully argued in court that a new business, Tower Bridge Tandoori, gained an unfair advantage through association. The latter was forced to change its name.
While it is difficult to generalise, two Smith’s Butchers might be regarded as causing no problem if they were located in two distinct towns. Similarly, Smith’s Graphic Design, say, would not clash with Smith’s Publishing – putting an element of description into your business name, therefore, is often wise.

Checking names

It is obviously better to get a name right in the first place. However, there is no longer any comprehensive approach to checking names that guarantees no overlaps.

Using your own surname is beyond challenge, but may not be best for image reasons. So, before using another name, check at Companies House (which only records the names of limited companies and LLPs) as well as trade directories, telephone directories, and membership directories for chambers of commerce or professional bodies. You could also do a search on the Web.

On balance, if you take reasonable care, particularly in the specific area of your business type, then you are unlikely to run into problems or find your customers confusing you with anyone else.

Protecting names

When it comes to protecting your name, certain routes are open to you:

• Some people will register a limited company for name protection even if they choose not to trade that way. They may trade as a sole trader or partnership and keep the company dormant until they decide to change their trading status.
• You are protected from passing off as described above.
• You can register your name as a trademark. It is not strictly necessary to do this because, over time, an unregistered mark can come to symbolise the reputation and goodwill generated by your business. The right to use the mark is protected by the common law of passing off. It may be wise to consider registering it, however, since protecting your rights is less onerous and expensive if you have obtained a formal monopoly on the mark. Once registered, a mark is protected for ten years, after which you can renew it.

Once your name is chosen and in use, it may be worth making occasional checks to see that no one else is setting up nearby or in the same line of business using a name that is likely to cause you a problem.

Choosing names

Names should be chosen for a reason. You need one that creates impact and does a real job for the business. Business names play several roles; they:

• Inform.
• Act to remind people of your existence.
• Project personality (perhaps intriguing potential customers or instilling confidence).
• Aid the creation of your business profile and image.

There are also some practical considerations:

• How will your name sound spoken over the telephone?
• Can people pronounce and spell it easily?
• Will people be able to find it easily in telephone directories? For example, would you look up the company 3i under “3” or ”T”?
• Does it have any unfortunate connotations, or hidden meanings, that will distract or upset people?
• If you plan to trade internationally, will your name carry an unfortunate meaning in another language? Calling a Vauxhall “Nova” in Spanish-speaking countries was an unfortunate choice, for instance, since “No va” is the Spanish for “Doesn’t go.”
• How does the name relate to your chosen market? For example, a name that is right for teenagers may not be right for an older segment of the market.
• Does it limit you? For example, many businesses were set up incorporating the word ‘Millennium’. In 2010 these may seem dated.
  Think through your choice systematically. Some people believe that a name beginning with “A” is useful because it puts them at the front of directories. The wrong name may dilute your image or give a wrong impression. At best, an inappropriate name may have a neutral effect.

What to consider when choosing a name
Consider the various sorts of information that a name helps convey.

Business description

A name can make clear what your business does. So it may:

• Be descriptive: Internet Graphic Design.
• Combine a description and a name: Bloggs Graphic Design.
• Be descriptive and linked to a slogan: Internet Graphic Design – experts in web design.
• Hint at activity more subtly: one business linked to graphic design is called The Ampersand Partnership and has a logo incorporating a large “&” sign.

Size of business

• How big are you? And how big do you want people to think you are? For many people a strategy of exaggerating their size makes sense (though do not get caught out with extreme claims). You may also want a name to accommodate planned growth.
• Certain naming mechanisms may automatically position you as small ? John Smith Associates falls into this category.
• Adding a word like ”International” may imply size, but if you don’t work internationally, you could get into trouble for giving a false impression about your business.
• Overloading a name – for example, Smith International Worldwide Enterprises – also tends to be self-defeating; it sounds pretentious rather than informative.
• Over-extending description can be similarly self-defeating – e.g. Smith’s Consultants, Copywriters, Counsellors and General Advisers.

Plan for the future

When choosing a name, consider the future. Think about how you may want to expand or extend your business; your name needs to be appropriate in the long term as well as the short term. You may, of course, opt for a name that does not describe your business function but is simply a made-up word. The name “Kodak”, for instance, was devised in this way.

Fashion

One danger when choosing a name is following fashion – which may date you in the long run. Currently many names seem to include elements of computer jargon, whether they have anything to do with computers or not – maybe to make them sound modern or innovative. Other names to avoid are copycat names.

Internet

It is worth considering the internet implications of your name. Can you find a suitable version of it as a domain name? Try to avoid repeated letters or hyphens because too many surfers will misspell it.

Image

Although this is a subjective area, small things can help to produce a more positive image.

• Consider names that are pleasant, memorable and even quirky.
• Something descriptive, however, can be spoiled by over-indulgence. BEST Typographers is fine, if a little bland, but Brilliant Excellent Scintillating Typographers is clearly neither clever nor punchy.
• Be careful with initials, which can be bland, and remember how long and how much money it has taken to make some well-known ones to become as powerful as they are today. BMW certainly has class and cachet now – Bavarian Motor Works might have been difficult to raise to similar status.

Promote the brand

Names that work are often neat and memorable – for example, Paperchase, Bodyshop, Softback Preview, Prontaprint. Clearly each of these names suits the respective business to which it refers. However, they are highly regarded not so much because of their name, but because of the promotional and marketing effort that has gone into building the brand over time. Such efforts can make even unlikely names work (Dixons, Currys). These activities can create brand personalities for made-up names too, for example, Kodak or Compaq.

Do not underrate the power of a name. It will become an inherent part of your business. Aim to find one that actively supports your intentions, and that will play a part in building your business and making it successful now and in the future.

Many people trade under their own names, and others use some device such as the name of the road in which the business is situated. The danger of this is that the easy approach may produce something bland, easily outdated, unpronounceable or too like a competitor’s.

Does your business name matter? Emphatically, yes. A name may do no harm. On the other hand, it may work positively in terms of identifying you and all you stand for.

Useful contacts

Companies Registration Offices

Records of limited companies are kept at the Companies Registration Offices.
They also offer guidance on how to form a limited company.
Companies Registration Office (England, & Wales)
Companies House, Crown Way, Cardiff CF14 3UZ

T: 0870 333 3636
W: www.companieshouse.gov.uk

Companies Registration Office (Scotland)
Companies House, 37 Castle Terrace, Edinburgh EH1 2EB

T: 0870 333 3636

Companies Registration Office (N Ireland)
1st Floor Waterfront Plaza, 8 Laganbank Road, Belfast BT1 3BS

0845 604 8888
W: www.companiesregistry-ni.gov.uk

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