Business Name vs Incorporated Company (Part 1)

business name            versus          company

A business name is simply a trade name or in other words, a name used by the owner of a business to distinguish his business from other businesses. An incorporated company on the other hand, is an artificial person created by law with legal personality which renders it distinct from its members.

While the owners of a business name can be held liable for acts done under the business name, the shareholders of a company cannot be held liable for the acts of the company.

It is common to see many businesses (whether small scale or even large scale) with sign boards like “Ejike & Sons”, Omega Electronics and Sons”, AYB Delight Stores” etc. All of these are examples of business names and are often used by: individuals who do not wish to be burdened with the intricacies of an incorporated company; illiterates; or people who are ignorant of the advantages of a company over a business name.

The above is not to say that a business name does not have any advantage as the major advantage it has is the protection of the trade name. This in essence means that once a person, firm or a company registers a business name at the Corporate Affairs Commission (CAC), the registration would provide protection against parallel registration or use of the name or style of trading by any other person.


 Registration of a business name

The registration of a business name is done at the CAC however, not all business names are registrable. The Companies and Allied Matters Act 2004 (CAMA) provides for the instances in which a business name will need to be registered that is:

  • in the case of a firm (partnership), where the name does not consist of the true surname of all partners without any addition other than the true forenames of the individual partners or the initials of such fore names. For example in the case of a partnership between John Mensah and David Benjamin, where the partnership consists of just the two names without any additions or their initials alone, there would be no need to register the business name. Where however the true names are not used or there is a mixture between their names and other names, there would be a need to register the new name;
  • in the case of an individual, the name does not consist of his true surname without any addition other than his true forenames or the initials. For example, a business in John Mensah’s name or in the form J.M does not require registration while anything different would require registration; and
  • in the case of a corporation whether registered under CAMA or not, the name does not consist of its corporate name without any addition. For example, ABC Limited as a business name does not require registration while ABC and T Limited would require registration.

(to be continued)

Oluwatosin Phillips

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