Protect a Trading Name
September 29th, 2008 . by ClivetI am a sole trader and only wish to register and protect my trading name. I have carried out a name check at Companies House and it is free to use.
Could you please advise me of the steps to take to protect my name without having to go through all the costly procedures of setting up a limited company?
My profession is as a management consultancy business, so if someone was to register a limited company using my name it would not be totally disastrous as it would put my personal reputation at stake.
Even though the company would be dormant, as it is registered in my name would the financial exposure liability be limited to the assets, even though there are none? You see I am also planning to take out Professional Liability insurance as protection, and hence the question that I have now raised. If the Limited Company even though dormant can protect my personal assets against courts from seizing them in the event of trading problems, then this would be great news and save me the annual expense of paying insurance premiums which are not cheap.
UK Limited companies are separate persons in law, distinct from the people who own them and therefore any claim brought against your sole trader business would not affect the company even though you owned it.
As the company would be dormant, it would not incur liabilities and hence it should have no affect on your insurance position.
Owing the company, but carrying out work as a sole trader would not provide protection as the two businesses are separate.
Whether or not trade is carried out through the company, professional liability insurance may still be required or at least a good idea as it will likely cover different areas.
Limited liability is protection to private assets should the company be unable to pay its debts, whilst professional liability insurance will more likely cover the quality of work done and work related accidents for example.
There are various options available from the multitude of company formation agents. Some offer a managed service whereby they register the name at Companies House and hold it on a person’s behalf.
They take care of the annual return submission and the filling of the dormant company accounts. If the sole trader or partnership ever wishes to convert to a limited company then the incorporation agent will transfer the company to them.
This is an example of a hassle free means of protecting a company name without having to become director or shareholder of the entity. There is usually a fee both for the initial registration and for holding the company and again when it is transferred to the business.
Some commentators suggest that holding a dormant company form the purposes of securing a name actually requires very little administration and work. At the same time the company formation agent received money for setting up the company and then gets to retain it should the purchaser no longer viewed the name protection as necessary.
They could then sell the entity as a ready made company and continue the practice of making money for minimal effort.
Those same persons advocate the simpler version of protecting a company name; namely that of forming a standard limited entity and maintaining it themselves. The statutory duties are far from taxing with reminders from Companies house when items are due and the cost savings which are not inconsequential.
Preference seems to be with the latter approach because as more people become familiar with online banking and shopping facilities, they are far better equipped to fill out and file simply online forms.
The charade is up for those who make protecting a company name seem more difficult and complicated than it really is and who play on people’s ignorance.