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When you run a business in New Zealand, you can choose to operate it using a different name from the one you used to register with the NZBN or Companies Office. Your trading name is the name your customers end up knowing you as. As such, it can become a valuable asset for your business as it gains goodwill and customer recognition.

Therefore, it is crucial to take sufficient measures to protect it. If you are starting a new business, you can do this by registering a trade mark, or if you are buying an existing business, you can add a clause to the agreement for sale and purchase of the business. This article will discuss what are the benefits of using a trading name for your business and the risks associated with failing to protect it.

What Does ‘Trading As’ Mean?

When you carry out your business operations, you can choose to go by a name that is different from your registered business name. This new name is known as your trading name. 

Companies in New Zealand often use this approach, as it can be beneficial for branding reasons. 

For example, you may initially incorporate your company as Smith & Co Limited, but later on you may decide that you want your customers to know you by Smith & Co Skincare (instead of your registered company name), as this name is more representative of your commercial activities. 

If your company uses a different trading name to its registered legal name, you need to ensure that your business documents and communications also display your company’s registered name, to avoid potential liability claims as a result of misleading your customers.

Can You Use Multiple Trading Names?

As a limited liability company, you can use more than one trading name, but the Companies Office will only record the first one. For invoicing and legal purposes, you need to mention your current and previous names.

Starting a New Business 

When you choose a name for your new business, you need to make sure that it is distinctive enough from other existing businesses, especially if you are incorporating a company (separate legal entity). An excellent place to start is to search your desired name using a free tool called ONECheck.

For example, if you register a name for your business that is too similar to an existing competitor’s name:

  • your brand can get diluted; and
  • you can incur unnecessary legal fees and rebranding expenses (your competitor can present you with a cease and desist letter to stop you trading with this name).

Buying an Existing Business

When you buy an existing business, it is a good idea to purchase its trading name. This is generally sold as part of the business’s intangible assets. The longer a business has been trading for, the more value its trading may have, depending on goodwill and customer recognition.

How to Protect Your Trading Name

When you register a company name with the New Zealand Companies Office, other companies can no longer reserve or use a name that is identical or too similar to yours. Trading names, on the other hand, are not protected unless you register a trade mark. You can do this by applying to register with IPONZ.

When you purchase an existing business, you need to take some measures to prevent others from using your trading name or company name. These include: 

  1. taking over the original seller company name or registering a similar company name with the Companies Office after you purchase the business;
  2. adding a clause to your agreement for sale and purchase of the business to make sure that the seller agrees to change the name of the existing company and transfer to you the ownership and rights to use all names associated with the business; or
  3. protect your trading and company name by registering a trade mark with IPONZ. 

Key Takeaways

When you choose a name for your business, it is vital to get it right, not just from a branding perspective, but also from a legal perspective. Some key points to consider include that:

  • you can choose to trade using a different name from the one you registered with;
  • your trading name is a valuable asset for your business, so it is crucial to protect it;
  • if you are starting a new enterprise or buying an existing one, you can trade mark your business name with IPONZ; and 
  • if you are purchasing an existing business, your sale and purchase agreement should outline restrictions around the future use of the name.

If you need help with conducting a name search or registering a trade mark, contact LegalVision’s trade mark lawyers on 0800 005 570 or fill out the form on this page.

FAQs

What is the difference between trading name and business name?

Your trading name is the name your customers know you as. This can be different to the name you previously registered your business with. Having a trading name can be beneficial for branding purposes as it often reflects your products or services.

Can a company trade under two names in NZ?

When you register a limited company name with the Companies Office, your name is protected under New Zealand law and no other companies can use it (this is not the same as registering a trade mark). Unlike your trading name, your company name does not have to be descriptive of your business activities. However, if you are trading under a different name, you must include both on written documentation such as your legal agreements.

Can a sole trader have a trading name?

In New Zealand, sole traders can use any trading name they like, since it is not compulsory to register with the NZBN. However, regardless of your business structure, it is a good idea to check whether your trading name is available before you start using it, to avoid potential intellectual property issues.

How do you create a trade name?

You can use anything for your trading name, the name you use publicly, and you do not need to register it. Just make sure that you include both names on official documentation to avoid confusion and do not infringe any trade marks or use restricted words.

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