So many people have the question, “what is a trade name,” on their minds. Being an SME in Africa means you have a name(s) everyone who’s familiar with your business recognises. These means of identification can range from a business name to a trade name or even a trademark.
The terms ‘Trade name’ and ‘Trademark’ sound similar, but it’s necessary for an SME in Africa to understand the difference. This knowledge is even more essential for businesses in the startup phase. Before delving into the details, let’s understand the whole concept behind a Trade Name.
What is a Trade Name?
A Trade Name is the name by which a business is known outside its registered company/business name. Trade name is also known as ‘Fictitious’ business name and requires proper registration with the country’s relevant governing body or state.
Asides being called fictitious, trade name is also tagged by a couple of other names such as – ‘Operating as,’ ‘doing business as,’ ‘trading as,’ amongst others. Typically, companies and businesses adopt trade names rather than using their lengthier registered name. Also, trade names get used when a business’ preferred name cannot be registered.
Difference Between A Trade Name and A Trade Mark
A trade name is a name used by a business to distinguish itself from other businesses. According to the Company and Allied Matters Act (CAMA), every corporation, firm, or individual carrying out business in Nigeria must be registered at the Corporate Affairs Commission (CAC) within a stipulated duration of twenty-eight days of business commencement.
On the other hand, a trademark is any phrase, word, design, or symbol by which a business’ product or service is identified. Trademark registration provides legal protection for abiding business owners, but the reverse is the case for businesses without one.
Pros and Cons of Using a Trade Name to an SME in Africa
Most businesses adopt both legal business names and a trade name. The legal name is the one that appears on all government forms and legal documents. On the other hand, trade names appear on mostly signs and advertisements.
Before deciding to adopt a trade name as an SME in Africa, it is important to understand it comes with some pros and cons. The SME360 community has put together some pros and cons to consider before making this decision.
Pros of a Trade Name to an SME in Africa
- Registering a trade name can be very affordable.
- It helps to give your business some more credibility.
- Trade name help to differentiate your brands where a variety of products are involved.
- With a trade name, you can gain more clarity for your business’ purpose.
- It helps to distinguish your business from other businesses.
Cons of a Trade Name to an SME in Africa
- Unless you register for a trademark, you have no exclusive rights to your trade name.
- The application procedure can be quite extensive.
- A trade name most times is only valid within the jurisdiction it was filed in. For business owners looking to operate elsewhere, you might need to file for another one.
Requirements For A Trade Name Registration
Registering your trade name comes with some requirements which include:
- You must have an existing business corporation that has also been registered.
- A business name
- Location of your business and also mailing address for the new trade name.
- Names of individuals to be listed on file for the trade name.
Frequently Asked Questions About A Trade Name
Should I make use of my business name or trade name?
The decision to use either a business name or trade name is a big one for you as an SME in Africa. However, certain factors are considered when opting for a trading name rather than a business name. Putting all of these factors into consideration will help you decide.
Will a trade name confuse my customers?
While adopting a trade name can be a good business decision, it can also be quite confusing for your existing clients. However, this shouldn’t change your mind. All you have to do is be prepared to answer questions regarding the change. Also, ensure you clearly communicate that your business remains the same regardless of the name change.
Will a trade name harm my company/business’ reputation?
This fear is understandable because building a strong brand is hard work. If adopting a business name will negatively affect people’s identification of your brand, it’s better not to adopt one. Just make sure you weigh the options to know what decision to stick to.
Should I change my trade name officially?
If you’re considering adopting a trade name, you might as well consider going all the way by making it official. The process can be quite daunting, however, it will pay off in the long run.
Conclusion
As an SME in Africa, it is vital to pay attention to what name your business carries. While choosing a name, also pay attention to the rules and regulations governing such a process legally. You risk losing your brand value in the long run if the legal aspects are not well taken care of.
In all, you want to ensure you choose a name that represents what your brand/business stands for clearly. Furthermore, in a situation where switching to a trade name will cost you your already established clientele, you might want to think twice about making such a move.