Your trading name is one of the most important pieces of information that you need to get right. It might seem very obvious, but so many times we see examples of improper usage of a business name that causes both us – and our clients – significant problems.
For example, I might set up a business as a sole trader called “Jason Williams Cars”. Or I might become a sole trader with the business name of “Bionic Jasonic Cars”. Alternatively, I could set up a limited company called “Jason Williams Ltd” with a trading name of “Bionic Jasonic Cars”.
Firstly, I must ensure that all of my business stationery states my correct legal entity. Both my stationery and my website must clearly state exactly who my customers are contracting with. Too many times we see a trading name only and no clue as to whether the client is a limited company, a sole trader or part of a business partnership. It is a criminal offence to not disclose this information very clearly. Partners of a business need to be individually named unless there are more than 20. For further guidance on anything in this paragraph – refer to Sections 1200 – 1205 of the Companies Act 2006 https://www.legislation.gov.uk/ukpga/2006/46/section/1205
It also causes practical and legal difficulties.
For example, if you get sued. If you are a sole trader and you get sued in the county court – the case AUTOMATICALLY gets transferred to your local court. But if you are a limited company, the case AUTOMATICALLY gets transferred to the Claimant’s local county court.
We have had a case where a member was a limited company BUT at the time they sold the allegedly defective car some months previous, they were a sole trader*. Because they didn’t tell us, we allowed the Claim to go unchallenged in so far as trading name was concerned. This caused significant complications down the line with regard to where the case was due to be heard (a 400 mile round trip extra) and with having to convince the court that the wrong party was being sued. The judge simply allowed the Claimant to alter the name of the Defendant – but said that the case was still to be heard in the Claimant’s local court – due to the failure of our client to mention in the Defence that the Defendant ought to have been in the name of the sole trader as opposed to the limited company. Had this been addressed from the outset, the case would have been heard “on his doorstep” – and not the length of the country away.
(*The sole trader became the sole director of the limited company)
It is therefore in your, our and everyone’s interests that it is made clear exactly what your trading status is. No guesswork should be necessary and any ambiguities need to be corrected. Lawgistics Members can get guidance on this or other legal matters by contacting the legal team.
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