Pros and Cons of using a Trading Name

Many people believe that a Company has to use its name as its brand when it communicates with its clients. But it does not have to be. A Company can use a trading name instead. Or even more than one.

A trading name is just a name used instead of the legal name. There is no need to file anything at Companies House nor at HMRC when creating a trading name but there are a still a few things to keep in mind:

1. You will need to inform the bank of those trading names so that you can cash cheques for example. While you can create separate accounts, you don't have even though it's good practice. 
2. Even though no registration is required, the same rules that apply to company formation apply to trading names. For example, the trading name cannot be similar to another company or business name in a way that might be confusing. Also, the use of sensitive words is prohibited as part of a trading name in much the same way as it is for limited company names. You cannot use words like “association”, “group”, “federation” for example.
3. Also, when using a trading name as part of carrying out business, a company is required to display the appropriate information in all places where the business is carried out and on all documentation including invoices. So for example, if ABC Limited is trading as XYZ, then they must make it clear by displaying  "ABC Limited trading as XYZ" on their letterhead, their website, their premises and so forth.
4. Lastly, and most importantly, because a trading name is not registered as a limited company, it is not properly protected. There is the risk therefore that someone might register the trading name as a limited company. They will then have the right to the name and can force you to stop using it. Ironically, a way around this is to register the trading name as a limited company, then keep that company dormant. While it might seem to defeat the point of using a trading name, because the company is dormant and therefore has minimum maintenance cost, savings would still be achieved compared to segregating the business into separate legal entities.