Sole Proprietorships (Trade Names)

Trade Name – Sole Proprietorship

When a person engages in business with no partners and not through a corporation, that person operates what is known as a sole proprietorship. That person is called a sole proprietor and may prefer this method of business ownership because it is simple.

A sole proprietor is personally liable for all debts and liabilities of the business. That may be appropriate so long as the business is simple and operates on a relatively small scale. But as the business grows, it is not unusual for business owners to take on partners, or to incorporate and invite other shareholders to participate in the business. Click: “Partnership” and “Incorporation”.

Trade Name

When people do business, they typically give their business a name. An example is where a fellow named Bob gives his business the name: “Bob’s Painting”. He is operating a sole proprietorship, and he has given his business a trade name which he thinks describes what his business does. But giving his business a name did not establish it as a separate legal entity. “Bob’s Painting” is simply an extension of Bob in his personal capacity operating under this trade name.

Bob must register the trade name with the Government of Alberta to allow the public to conduct a search to distinguish ownership of businesses which operate under similar trade names. Indeed, in a large urban centre there may be many people operating under similar trade names in a particular industry. That gives cause for confusion, and for concern.

Bob will be identified with the trade name as he grows his business, but given the trade name he has selected, he may have trouble growing the business, or selling it: First, Bob’s business may become confused with one or more other people named “Bob” who operate a similar business. Second, any partner that he may choose to take on in the future may wish his or her name to be added to the trade name, which may cause confusion with potential clients. And any good will associated with the former name may be lost, and new advertising may be costly. Finally, anyone whose name is other than ‘Bob’ might see little value in buying a business whose name is so closely associated with the former owner.

Sole proprietors often choose to incorporate or take on other partners under a trade name that is more generic such as, for example, “Quality Painting & Decorating”. So long as the business is unincorporated, its trade name cannot use words such as “limited” or “corporation” which imply that the business is a corporation.

You can register a Trade Name at “New Urban Registry” –which, incidentally, is a trade name registered by New Urban Registry Ltd.