Do you know the difference between a business name and limited company? Most people don’t. Legal Forms does!
(If you already know the difference, and want to get started on the first step in the registration process: click here
Which is best suited to my business objectives?
What is a business name?
Business name registration allows a person or company to operate under a separate name.
(Read our step-by-step guid on Business Name Registration)
Business name for an individual
Let’s say your name is “Mustapha Ngonadi”. Mustapha sells fine leather shoes. Mustapha feels that it would be more professional to operate under a new name. Mustapha decides that “Italian Leather Goods”is a good name and proceeds to register it. This means Mustapha can invoice his customers under “Italian Leather Goods” and not “Mustapha Ngonadi”. Mustapha’s official documents read as follows:
“Mustapha Ngonadi” trading as “Italian Leather Goods”
Business name for a pre-existing company
Let’s say there’s a company called “Tea House Limited”. Tea House only sells tea through its chain of stores. The management of “Tea House Limited” decides that the company should also sell coffee. However, the name Tea House Limited would be confusing to customers who want coffee. So, Tea House decides to register Coffee House as a business name belonging to Tea House Limited. The official documents read as follows:
“Tea House Limited” trading as “Coffee House”
(You can get started on the Business Name Form online.)
Is it better to operate a business name as an individual or as a limited company?
Operating a business name as an individual is the cheapest and easiest way to start business. However, it’s much safer financially to operate a business as a limited company. If Mustapha Ngonadi goes broke, his personal assets will be at risk. This means creditors can take his store, personal car, and even his house. If Mustapha had decided to operate “Italian Leather Goods” as a limited company, creditors could only take his store. This means Mustapha still has a home. Hooray!
(read the step-by-step guide on registering a private limited company)
There may also be intellectual property issues when operating a business name as an individual. Let’s say Mustapha Ngonadi has a richer business rival who also sells shoes. The rival’s name is “Abdul”. Abdul noticed that Mustapha has not registered a company or a trademark. So one day, Abdul decides to register “Italian Leather Goods” as a limited company and also as a trademark. Because Abdul has more money, he sues Mustapha in court over infringement.
(You can get started on the ltd registration documents online )
Do you think you now know the difference between a business name and limited company?
So what will you choose? Business name registration or limited company registration.
No matter your decision, the first step is always the name availability search. It only takes 2-3 minutes.