What Does 'Trading As' Mean in Business? | LegalVision NZ (2024)

When you run a business in New Zealand, it must be registered with the NZBNorCompanies Office. However, you may wish to use a name other than your registered name – this is known as a trading name. Your trading name is the name your customers recognise your business with. 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. 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 trading name, which is a name that is different from yourregistered business 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.

For clarity, and to avoid potential liability claims as a result of misleading your customers, business documents and communications should acknowledge both the trading name and registered legal name of a company. Using the above as an example, this will typically take the form of ‘Smith & Co Limited, trading as Smith & Co Skincare’.

Trading Name vs Company Name

A company is a legal entity, which can do things like enter into contracts and borrow money. A trading name is not a legal entity on its own, meaning it cannot be a party to any contracts and is instead the name by which customers know the business.

Using 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. An excellent place to start is to search your desired name using a free tool calledONECheck.

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. The trading name will typically form part of the business’ intangible assets that are for sale. The longer a business has been trading, the more value its trading may have, depending on goodwill and customer recognition.

How to Protect Your Trading Name

Registering a Trade Mark

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. On the other hand, trading names are not protected and can be used by other businesses. However, you may protect your trading name and prevent its use by other parties by registering a trade mark. You can do this by applying toregister with IPONZ.

Purchasing an Existing Business

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 (as the Companies Office will not register a company where there is another company with the same or a very similar name);
2. adding a clause to your business sale agreement to ensure 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. protecting your trading and company name by registering a trade mark with IPONZ.

Key Takeaways

When you choose a name for your business, you need to abide by certain legal requirements in New Zealand. Some key points to consider include the following:

• 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 business sale agreement should outline restrictions around the future use of the name.

If you need help conducting a name search or setting up your business, our experienced business lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today on 0800 005 570 or visit our membership page.

Frequently Asked Questions