The Law Office of Hutchinson, Thompson, Henderson & Mott

The Difference Between a Numbered Company and a Named Company

December 4th, 2013

By: Nathan Green

 

Movies and television often talk about numbered companies as some kind of slippery, underhanded, business entity – or at least one more likely to engage in questionable or illegal practices than a named company.  However the reality is a bit different.  In Ontario when you are setting up a company you have three options as to names.  First you can incorporate a company with a name – Nathan’s Roofing Inc. for example.  It’s a name that people will be able to remember, you can put it on business cards, make a little graphic for it, etc.  Your second option is to create a corporation (with a name or numbered) and adopt a business name which is registered with the government.  You then use the business name on advertising, business cards, etc.  This is very common and often does not occur to people.  Every named company must end with the word Incorporated, Corporation, Inc., Ltd., or some other variation to indicate a corporation, yet many companies use business names that lack those words: how many chain restaurants have “Inc.” on their signs?  However there is one twist in this process.  In order to ensure that your company name or business name is not going to confuse the public, it needs to be different from every other company or business name out there.  To ensure this is the case you have to pay a fee to have a search done of a government name database prior to registering your name, this adds expense and time to the process as your name may be taken and you will have to think of a new one.

The final option is to set up a numbered company.  The advantage to a numbered company is that there is no need for a name search.  You simply tell the government you want a number and they will assign one.  This saves time and money but it leaves you with an entity that is not really consumer friendly.  1278865 Ontario Inc. lacks that certain ring to it.  However many companies exist that do not deal directly with the general public.  You may for example run a cupcake business and rent the property from a landlord.  That landlord could very well be using a numbered company to hold title to the property.  The general public will never have to remember the name and the landlord will never have to advertise beyond that the building is available for lease, so there is no need for a name.

While it is true that typically numbered companies are used for purposes other than providing goods and services directly to the general public, the reasons to incorporate are the same – to shield directors, officers, and shareholders from personal liability and/or for tax reasons.  Furthermore fraudsters are aware that the general public distrusts numbered companies and so the majority of frauds I have seen involve companies with full names.

In short numbered companies are slightly cheaper and easier to set up but a named company is generally preferable when dealing with the public.  However numbered companies have the same reporting and disclosure requirements as named companies and it is generally not an indication of impropriety that a company has a number instead of a name.