Business Name Registration
When Is It Not Required to Register a Business Name?
Whether you need to register depends on both your location and the overall structure of your business. Those who use their legal name and conduct business on their own will not need to register, while most other businesses outside of a sole proprietorship will. This does not mean businesses shouldn’t register their name. From taxes to liability, it’s worth examining the ramifications of skipping this important step.
What Can Registering a Name Do for Your Business?
Before we dive into this question, you should know that registering the name is different than registering a business. If you’re incorporating your business, most states will automatically register the name as a part of the standard paperwork.
If you’re not required to though, many businesses will register the name to give them an official public presence. They’ll ensure that all of their official communication (e.g., contracts, business cards, etc.) bears the proper name, so there’s no confusion or disputes. The name will also be used if businesses need to take out a loan or if the company advertises to the public.
How Does Registering a Business Name Protect You Legally (If at All)?
Having an official registered name may or may not protect you legally, depending on how you choose to register. If you choose to get an entity name, this will protect you on a state level. Different states will set different rules on what you can name your business based on what you do and whether the name has already been registered. If you choose to trademark your business name, this protects you at a federal level.
So let’s say that you wanted to start a business refinishing deck chairs. If you felt that the level of competition in your area was very low, then you might want to stick with an entity name. But if you’re starting an ecommerce company where you’ll be operating on a national level, then a trademark ensures that you won’t clash with other businesses doing the same.
What Should You Know Before and After You Register a Business Name?
The most important thing to know is that the rules are interpreted differently by different people. Most states will prohibit you from using the same business name as another officially registered company — but not all will. In some states, you might be required to alter your name to ensure that it fully showcases what your business does. For example, you couldn’t register your pool cleaning company as Maids R Us.
The point of registering is to give people a reason to remember your company and build a reputation with clients and customers as time goes by. Whether you need to get the federal government involved or you just want to stick with a state level will depend on your industry and scale of your company.
Are There Any Costs Involved to Register a Business Name?
This answer will depend on where you’re registering and what type of business you have. In some cases, you may only have to spend a few dollars (e.g., in the case of a sole proprietorship) if you’re registering at the state level. However, a trademark will cost a minimum of several hundred dollars, so it’s important to keep these expenses in mind before deciding what kind of legal protection you want. If you live in a state with lax rules on the subject, then it may make sense to expand your budget for the trademark (regardless of the type of business you’re operating).
What Are the Steps to Registering a Business Name?
There are three key steps to registering a business name. The first is to check to make sure that your name is unique. If you’re planning to go with an entity name, you can typically check the registered names on the Secretary of State’s website. You might also have to check the federal trademark records or simply search the web for businesses of the same name. From there, decide what your entity name needs to ensure it’s both communicative to your customers and meets the legal requirements.
For instance, if you’re registering as an LLC, the name of your company must include the abbreviation or full phrase (limited liability company). You are not allowed to use confusing government nicknames, such as FBI, in an official registered name. Again, the formal rules will vary depending on how you’re structuring the company and where you’re registering the name.
Once you’ve settled on a name, you’ll need to determine its structure (e.g., LLC, corporation, general partnership, etc.) and submit all necessary paperwork. Each state will have its own process, so you’ll need to research the specifics to ensure you have all your ducks in a row.
How Should I Structure My Business?
There are several categories for all business owners to know before they decide how to best structure their business:
- Sole proprietorship: This is the easiest way to structure your business. If you’re in complete control, then you’re automatically considered a sole proprietorship (as long as you don’t register in any other way). Your business and personal assets are not separated, and you can be held liable for debts and obligations.
- LLC: An LLC will protect your personal belongings, such as your home or savings account. So if you do declare bankruptcy or face a major lawsuit, the banks or accuser cannot come after your holdings. LLCs are subject to the rules of the state, meaning they may need to be dissolved and restructured when company members change over the years.
- Partnerships: A limited partnership will usually feature one partner with unlimited liability with the rest of the partners facing limited liability. This means that the single partner can face personal liability if the company fails. The trade-off is that limited liability partners won’t enjoy the same power as the unlimited partner. There’s also a limited liability partnership, in which all partners will have limited liability and thus an equal share in the company.
- Corporation: There are several corporation choices available to businesses, but they all share one thing in common. In all cases, the legal entity of the business is separate from that of its owners. So corporations can be held liable, but the owners can’t.
What Else Should I Know?
The most important thing to know is that there are costs to every decision, depending on how you want your company to function. A corporation faces the least liability, but it’s also the most expensive to set up. Failing to register your name might seem prudent at the time, until you realize that your business is growing and often confused with the name of a competitor.
Your business name is an important thing. If it’s too similar to that of other businesses — even ones outside your industry — you might be surprised at just how much trouble it creates for you. So even if you are allowed to register the name, that doesn’t mean that you should.
If you need help deciding, TRUiC’s free online business name generator can help. Instantly see if the domain name is available for your company and test out a few options before deciding on your favorite one. Taking this extra step can have a major impact on how you’re seen in the public eye and what kind of flexibility you’ll have in the future.