If you are currently running a limited company and have multiple businesses that you run. You may have thought about running these under the same trading name. However, you may have been reluctant to, like many others, due to whether this is possible or not. Thankfully, that is the question that we are going to clear up for you today.
We will also explain the implications of this so that you can make a more informed decision should you want to consider running multiple businesses under the same registered company. We will then move on to the benefits and examine the incentives behind making such a decision. Whilst finally covering what can sometimes be the confusing topic of trading names; and what rules dictate what you can and can’t choose as a trading name.
So can I or not?
Well, in a word, yes you can. If you have a limited company that isn’t in bad standing, you can and are legally entitled to run multiple businesses under that single name. However, your limited company can not have multiple trading names also registered as official names. You can however have multiple trading names. This is usually done for marketing reasons etc.
Common advice though is to step back and sometimes leave the companies as separate entities. This is entirely dependent upon what different types of business transactions they conduct, which could mean that, if they are joined, it could have detrimental tax implications for your limited company.
What are ‘trading names’?
Trading names is a commonly used term that essentially refers to business names. Essentially it is a way for your limited company to trade under a name that might not be the same as the name you have registered with Companies House. Using multiple trading names can also give you the possibility to run several businesses under the same limited company.
Each of these ‘trading names’ becomes its own separate division of the limited company. You do legally however need to specify this as such. E.g. if you have a website for one business, you would need to state that ‘it is a trading name of XXXXX’ with the latter being the name of your registered limited company.
It’s also important to note that multiple trading names aren’t only permissible if you run a limited company. This is also viable to other business structures. Such as if you’re a sole trader or a partnership.
Are there rules to choosing trading names for my multiple businesses?
Yes, when it comes to choosing your trading names or business names for your separate businesses, there are rules that you need to know of before going ahead and choosing your name. These are the rules that you need to be aware of:-
- You cannot have any legally binding abbreviations included in your trading name. E.g. you can’t have it ending with ltd (limited), LLP (limited liability partnership), or plc (public limited company).
- They cannot also contain any sensitive words or expressions unless you have explicitly sought permission.
- Be careful that it is not too similar to one of your competitors. This could then lead to the possibility of them accusing you of what’s known as ‘passing off’ and could lead to legal issues.
- If you have a trademark, you also need to ensure that your trading name is not too similar to the trademark that you have registered.
What are the benefits?
We have mentioned that there could be potential tax implications should you run more than one business under the same registered company name. But now we are going to look at the benefits. So what incentives are there to make this decision?
Well, if you start to diversify the products that you are offering to customers. It may sometimes be confusing if you retain the same trading name. Whereas separating into different trading names can help customers distinguish between the companies. For example, if you have two businesses that run marketing campaigns and one that just does website design, it may sometimes be more beneficial to have these as separate trading names.
This also significantly helps with brand building. It also means that customers will start to associate certain products and services with certain trading names. It also has the added benefit of saving time on setting up new companies, and also associated costs such as registering and filing your annual statements and accounts. Overall these are the main benefits of having multiple trading names under the same limited company. In the end, however, it comes down to whether it’s right for your company’s specific scenario.
Make sure you make the right choice
There are many different things to take into consideration when making this decision. And we advise seeking the advice of experts. Here at D&K Accounting, we specialise in providing reliable and robust accounting advice that will aid you in making the right choice and avoiding any tax implications that may be detrimental to your company’s financial health as a result of any potential merger.
Get in touch today with us for a chat if you want to know more about what options are open to you should you run multiple businesses; or indeed if you are planning to run more than one business. But, at the same time, you are unsure of the legalities surrounding this and which approach may be best for your company when it comes to any tax implications.