ComplianceSeptember 13, 2021

CT expert insights: Legal considerations when naming your business

Naming your business is one of the most important elements of forming your company—establishing who you are and setting the tone for your overall brand presence. But there’s more to naming your LLC or corporation than simply choosing your preferred name. There are important legal elements to consider as well. In this edition of Expert Insights, CT Corporation’s Manager of Customer Service, Tim Jensen, explains how to go about naming your business the right way and the key rules that exist around the process.

Tim will explain how to find out if your chosen name is already taken (and what to do if it is), complying with state requirements, and the difference between a legal name and a ‘doing business as’ DBA name. Learn how to use a DBA name to your advantage, what terms are considered prohibited words, and what to do when you’ve already formed but want to expand into another state or states. This is essential listening for anyone in the process of naming their business.

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Transcripts

Greg Corombos: Hi, I'm Greg Corombos, our guest in this edition of Expert Insights is Tim Jensen, manager of customer service at CT Corporation. Today, we're going to be looking at the critically important issue of naming your business. We'll offer some helpful hints on names and explain certain rules that exist about how you can and cannot name your business, including whether you can choose a business name that already exists. And, Tim, thanks so much for being with us.

Tim Jensen: Thanks for having me again, Greg.

GC: Well, this is a fascinating issue for so many reasons. Good entrepreneurs know that a well-considered name is important to conveying many different things. So well, why is this such a fascinating topic for business owners right when they're getting going here?

TJ: Yeah, I've been doing this for a long time and one thing I've learned is nothing stirs more passion or emotions for new business owners than their name choice and is probably the area they spend the most time thinking about. Because of this, it's important to understand what goes into getting your name approved to do business in the state or states you want to operate in.

GC: Alright, well, let's dig into this now on a more formal level. What exactly is a business's legal name?

TJ: Yeah, and this is a great question. And it can get confusing since the legal name of a business is not necessarily the name the business is known by or operates under. So, let's talk through this a bit. A business's legal name appears on this formation documents. It's the name businesses use when communicating with federal, state and local governments, when setting up accounts with banks or other institutions, composing and entering into legal contracts, filing their taxes, and so on.

The legal name is the one in use when a business is first formed, although it can be changed at any time by filing a name amendment. Also, a business can only have one legal name at a time, and no other business can choose the same legal name in a state wherever another business has already reserved or registered it.

In contrast, a business can have several what's known as DBAs or doing business as names at once. But these remain unprotected from the others using them. And we'll actually discuss this a little bit further in detail later on. The difference between a legal name and a DBA name.

GC: So, a lot to chew on already. But what you're basically saying is there are definite rules when it comes to naming your LLC or corporation.

TJ: Yes, that's correct, Greg, and there's more to naming your LLC or corporation than simply picking the perfect name for your business. Although that's certainly part of it. You must also make sure that the name complies with the state's requirements of LLC or corporation law before you file to form your LLC or corporation.

So first, this means that the name must not conflict with the name already on the Secretary of State office’s business entity file records list. Second, the name will probably have to meet requirements concerning required or prohibited words or phrases. Now required words are typically the endings associated with the entity type chosen. So, for example, corporations need to typically end in incorporated, Inc., corporation, or company, while LLC’s typically need to end with either limited liability company or the LLC abbreviation.

And then prohibited words or “red flag words” are designed to protect professions such as medicine, engineering, banking, as well as consumers. So, for example, if medicine or clinic was part of your name choice, the state may require you to provide a license to prove you’re licensed to provide that type of service, as they wouldn't want someone not licensed to be able to offer those types of professional services and confuse consumers. If you do not have a license, you will need to remove those red flag words from your name in order to get it approved.

And then finally, if you've already formed your LLC or corporation in your home and domestic state, but want to expand your business in another state or other states, you'll have to satisfy the other state's naming rules when you qualify to do business there as well.

GC: Which brings up an interesting question of can you keep using your business name if it exists in that other state that you want to expand to?

TJ: Yeah, and this can get a little bit confusing as well. You certainly can often use the same business name as your home domestic state for any foreign states you register in as long as it's not already on file in those foreign states and it doesn't violate any trademark rules. And this is actually a common practice for smaller businesses.

If you do plan to expand or operate your business into additional states outside your home domestic state, you'll also need to be cognizant of any other businesses using the same name or a similar name. And if there's a conflict, there are typically two options, you know, that the state will provide for you.

The first one is, and this is the most common situation, the state's going to require you to file with a DBA name to avoid the name conflict. This means that your legal name would actually be different than in your domestic state. But you will still be able to operate and advertise under that, you know, domestic state name. So, for example, if you had the name of your company or domestic state was AAA Rentals, and you were filing in Texas, and you were forced to file with a DBA, a name of let's say, AAA Rentals of Dallas, Texas, you can still advertise your business simply as AAA Rentals.

The second option is to obtain a name consent form. Now, some states allow you to obtain consent from the business that's actually causing the conflict, which is usually a similar name, but not exactly the same. This is typically a short form that the business owner signs giving you permission to use that name in that state. And you would include that consent form with your filing so that we get approved by the state confirming that you've been given permission to use that name.

GC: Excellent information. So before we get too far away from this, though, explain the difference between a legal name and ‘doing business as’ or DBA. Name. This is something you mentioned at the very beginning, but I think it's important to clarify.

TJ:  Yeah, I definitely want to clarify this because it can get a little bit confusing. So as previously discussed, every business has a legal name or their true name. And in the case of a sole proprietorship, or a partnership, that legal name is actually the name of the business owner or owners, since it's not formerly registered with the state at that time. In the case of a corporation, or a limited liability company, or other statutory entities that are actually registered with the state, the legal name is the one that's on the formation documents. For example, this would be the Articles of Incorporation or your Articles of Organization. So that is your true name, your legal name. And as I mentioned, that's what you use for contracts and those types of things.

If the person, whether it be a sole proprietorship, or partnership, or the company wants to do business under another name, that's where the DBA names now come into play. DBA names are also referred to as either assumed names, fictitious business names or trade names. So they can go by a lot of different names. But essentially, they're the same thing, in that you're using this name to do business under, which would be different than your actual true legal name. And there are no limits to the number of DBAs or assumed names that you can use.

Now, DBA names, unlike legal names, are often not exclusive in most states. And that means others could have a similar name, or even the same name in different parts of the state as you have for the DBA. So for example, if you incorporated Susie's Nail Bar Incorporated, which is your business's legal name, your competitors or any other company would be barred from incorporating or qualifying under that name as their true legal name. In some states, they would also bar the use of that name, if it was deceptively similar, just so there's no confusion from a consumer standpoint. And again, this is where the DBA names then come into play.

And as I mentioned, in most states that exclusivity of the name does, protection does not exist with the DBA names. So if you wanted to protect that DBA name, one option for you to be able to do to protect that would be to file that DBA under a trademark and trade name laws, which would then give you that protection that you might want.

And then just a couple of other things to note regarding DBAs. They're typically filed at the local level. I believe there are about 2,000 jurisdictions across the United States that register DBA names. So while they're filed at the local level, usually the city or the county, the state typically will still put in guidelines, so that each city and county is kind of following this the same way of handling these. And some of these guidelines include things such as maybe requiring a publication in a local newspaper to announce that the DBA, you know, has been provided and registered for and then also how long that DBA is good for most DBAs have an expiration date, and will need to be renewed at some point in time.

GC: Tim, you mentioned just a moment ago that if you want to make sure you're protecting your DBA or ‘doing business as’ name, you might want to file for protection under trademark and trade name laws. What do business owners need to know about trademarking their business name?

TJ: Yeah, and this is a great question because everything we've talked about so far has really been is your name available, you know, in that particular state. So, if it's available to state the idea is it should be available for you to use. But there could be some trademark issues.

So, if somebody has filed a name with the U.S. Trademark Office that actually carries that name and protects it nationally. So, you want to make sure that you pick a name that does not infringe on somebody else's trademark rights. If the LLC or corporation’s name will be used as a trademark, you also would want to take steps yourself to make or protect that name with the U.S. Patent Trademark Office.

So, one of the things you can do to check to see if that name has been trademarked is check with the U.S. Patent Trademark Office, they have a list of trademark names, you can definitely reference that as a guide for you, just to make sure that you don't start to register your name- because the states will approve it. Because they're not necessarily betting that up against the Patent and Trademark Office List. But at some point, when the whoever had that name trademarked, when they caught wind of it, they would then, you know, take action to keep you stopped from using that name going forward.

GC:  Also important to know, but that might lead to a question in the minds of some, how am I supposed to know all this? How do I know if other businesses whether it's in my state or certainly nationally with a trademark, could interrupt my plans here? But the good news is, is that there are some resources available on this issue, including checking on pre-existing business names, and you can even apparently reserve a business name before you're even ready to launch a business.

TJ: Yeah, that is correct. And these are a couple of nice options for business owners, if they're not quite ready to file, you know, their business entity yet. So, one of the nice things that you can do is put your name on reserve. And so, I mentioned earlier, you've taken a lot of time to think about your name choice and how it should be, and all those kinds of things. Maybe it's matching up with your website and those kinds of things, so you have that consistency across your platforms, your name, your website, those kinds of things. Now, you want to make sure that name is available to you before you make that final decision. So, what can you do as a business owner?

So, the first thing that I recommend is a name check. And that can help determine if your preferred name is available in the state or state records that you want to do business in. Doing a name check helps prevent a state from rejecting your documents because the name isn't available when you try to incorporate or form the corporation or the LLC. Most states have a public website of existing companies on file for you to check against to see if there's anything that would conflict with your preferred name choice.

And then secondly, if your preferred name choice is available in the state or states you want to do business in, you have to remember, it also remains available for anyone else too. Now, while it may be unlikely somebody could you know, be thinking the same thing you are and go to file with that name before you get to it. So how can we get around that? Most states let you file what's called a name reservation to protect your right to that name for a specific period of time, usually anywhere from 60 to 120 days. But the duration does vary by state. And many states will also allow you to renew that reservation, you know, to keep it reserved for you until you're ready to kind of go.

So, a couple of nice things about you know, the name reservations, they allow you to reserve your preferred name for future use if you're not ready to take those steps yet. But they also can come in handy if you've already incorporated, you know, or formed an LLC and then you want to change your legal name. Before you go through the process of you know, decide on the name and things like that, you'd want to make sure that the name was available. And then before he made those moves, you can go ahead and reserve that name so it's ready for you when you do those filings.

And then just one other tip regarding name reservations. You know, some business owners will elect to use a filing service to actually handle their filings for them. If they've gone ahead and reserved the name on their own, and then decide to use a filing service to handle it, you want to make sure that you provide that company with the actual name reservation because that name reservation is for you and if somebody else is trying to do the filing, the state's going to assume that somebody else is just trying to you know, steal that name, that you already have reserved. So, by providing them that name reservation, they can include it with the filing, and make sure that that you know formation gets handled for you properly.

GC:  Lastly, Tim, what kind of assistance can CT Corporation provide when it comes to naming?

TJ: Yeah, the nice thing about CT Corporation is they're available to answer all those questions. You know, if you're looking to form in a specific state, hey, how do I go check to see if my name is available? Could you even check that name of a loyalty for me? We're happy to do those kinds of things.

We also can talk, I've talked about some of the red flag words, the endings, those kinds of things running into your name by you know, somebody CT and just, you know, telling them what's in it. They could let you know if any of those red flags are in there if those prohibited words might be in there. Which allows you again to kind of switch up what you're thinking, maybe alter that name a little bit to ensure it's getting approved. Or if it does need to be that way and you are a professional, say in medicine or engineering, you know, just making sure that you have all the licensing ready, so that when you are ready to file you'll have everything needed to go.

So, I always encourage, because this is such an important step, make sure you get your questions answered. Talk to a trusted resource like CT, where they can help you just make sure everything is in line before you go and take those next steps.

GC:  Tons of excellent information as always, Tim. Thank you very much for your time today.

TJ: Thanks again for having me, Greg. 

GC: Tim Jensen is manager of customer service for CT Corporation. I'm Greg Corombos, and for more information on this subject please visit CT Corporation.

 

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