Business development · 25 June 2018

Naming a new business: 3 legal restrictions you need to know

Breaking any of these rules when naming a business can be very costly

Choosing the right name for a business is one of the first and most important decisions a business owner will make. Here, Grid Law founder David Walker outlines three important rules that will ensure your company name avoids infringement and other legal restrictions.

Some people know exactly what they’re going to call their business right from the start. Others agonise over the name long and hard. Often the name of the business will change several times before it’s just right.

A business name must be easy to remember and create an emotional connection between the business and its customers. But, as much as choosing the right name is important from a marketing perspective, it must be right from a legal perspective too.

Getting it wrong can be very expensive. You could be forced to re-brand and change the name of your business. So, here are three rules to give you the best chance of avoiding this situation.

  1. Don’t use a name that is the same or too similar to an existing company or business name

Choosing a business name that’s the same or too similar to an existing business name is perhaps the most common mistake business owners make.

Whilst it can be tempting for a new business to trade off the reputation of an existing business, this can back fire. We saw an example of this recently when a chicken restaurant opened with the name “Fernando’s” and received threats of trademark infringement from Nando’s.

So, my advice is to use a name that is unique to you.

To ensure your business name is unique, you must carry out a thorough search to find out what names are already being used.

The first place to check is the register of companies at Companies House. This is a database of all four million companies that are registered in the UK. Their search service is available free of charge on the Companies House website and can be accessed 24 hours a day, seven days a week.

If you try to register a company name that is the same or too similar to an existing company on the register, the Register of Companies will refuse to register it. There are many rules that the Registrar will consider when assessing the similarity between two names but some of the key rules are as follows:

  • Any punctuation in the name will be ignored
  • Words such as “the” or “www” at the beginning of a name and “and” or “and company” in the middle or at the end of a name will also be ignored
  • Words such as “two”, “too” and “to” and “2” are considered to be the same when used in a company name

There is a comprehensive list of these rules on the Companies House website.

Sometimes, as with the Fernando’s example above, the Registrar of Companies will permit the name to be registered but an existing business will object.

To avoid this, you should carry out a trademark search at the Intellectual Property Office (IPO). If you choose a name that’s identical or too similar to a registered trademark and you intend to sell the same or similar products and services, the trademark owner could pursue you for trademark infringement. If they are successful, they could force you to change your business name (as well as claiming compensation and any costs they have incurred in the process).

If the Companies House and IPO trademark searches are clear, carry out a general internet search. Sometimes you will find an identical or similar name that is being used but isn’t registered anywhere. If this name has a strong reputation, the owner will be able to stop you by taking legal action for passing off.

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  1. Don’t use any restricted and sensitive names

If your searches are clear, the next mistake to avoid is trying to use any restricted or sensitive words in your company name without permission.

Sensitive words require the approval of the Secretary of State before you can use them. These include words that suggest business pre-eminence such as “British”, a particular status such as “Institute” or a specific function such a “Tribunal”.

The use of certain names such as “architect”, “physiotherapist” and other health care professionals, in particular, are restricted and regulated by that profession’s governing body. You must obtain permission before using them.

There are also restrictions on using any name that implies a connection with the UK government or a local authority.

Again, before settling on a name, check the Companies House website which contains a far more comprehensive list of sensitive and restricted words than we can include here.

Finally, whilst it may seem funny at the time, the Registrar of Companies will refuse to register a company name if, in the opinion of the Secretary of State, the name is likely to be offensive to the general public. So, try to avoid any names that are a little risqué.

  1. Don’t Use “Limited” or “Ltd” unless you are permitted to do so

Only a limited company registered at Companies House should use the word “Limited” or its abbreviated form “Ltd” after its name. (A Welsh company which has stated that its registered office is in Wales can use the Welsh equivalent of these which is “cyfyngedig” or “cyf.)

Sometimes I see sole traders or partnerships using the word “Limited” after their name. You mustn’t do this because it’s misleading.

It’s very easy to fall foul of any of these rules and breaking them could prove to be very costly.

At the very least, you will have to incur the expense of a re-brand. This will include having all your business stationery reprinted and website updated (and possibly purchasing new domain names).

The re-brand may also be damaging to your reputation if it attracts negative PR and you lose any goodwill or reputation you have built up in the name.

If you have any questions about choosing the best name for your business, please feel free to email me at editors@businessadvice.co.uk and I’ll happily answer them for you.

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ABOUT THE EXPERT

David Walker is the founder of Grid Law, a firm which first targeted the motorsport industry – advising on sponsorship deals, new contracts and building of personal brands. He has now expanded his remit to include entrepreneurs, aiding with contract law, dispute resolution and protecting and defending intellectual property rights.

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