Legal Update: Current Business Name Requirements

Forming a new business is often a stressful process which is accompanied by challenges and obstacles. But naming the business may be fun when compared to the processes which need to be followed. According to CrowdSpring, 77% of people refer to certain items by brand names.

When choosing a name for a business, entrepreneurs need to put effort and creativity into this process seeing that it may affect future sales.

Choosing business names may seem easy and simple to some, but there are a range of rules surrounding the naming of a business, whether it is an LLC or a corporation, that entrepreneurs need to follow and adhere to.

This article will explore the legal requirements of naming a business, and how to reserve this name once created. 

Legal requirements when naming a business

Different states have a different set of rules for the naming process and its requirements. Despite this, there are a general set of guidelines which all states adhere to for this process. Firstly, when forming an LLC, the name is required to contain the phrase “limited liability company” or the abbreviation.

Secondly, the name is not allowed to include words or phrases which are related to government agencies. Thirdly, business names are only allowed to use restricted words such as “bank,” “attorney” or “university” if a licensed individual is included. It should be noted that when using restricted words, additional paperwork might be required. 

Reserving a business name 

Although entrepreneurs are able to reserve a business name by themselves, it is recommended that they hire the services of a professional business service to do it for them. This would save them time and effort which could be better utilised. Two popular and reliable companies which offer this service are BizFilings and MyCorporation.

BizFilings offers low reservation prices being $35 and are equipped with vast experience as they have served over 500,000 since their establishment. MyCorporation charges $49 for business name reservation services, but this higher price tag is supported by their excellent customer reviews. The quality of service that MyCorporation offers has made them one of the most popular choices for this service. 

Reserving a business name is accompanied with a range of pros, as well as a range of cons.

The pros to reserving a business name is that:

■ It buys entrepreneurs time. The name will be reserved even if the business is not formed yet.

■ Nobody else will be able to use or claim the name chosen. But this reservation is not permanent. The name reservation periods can be as short as 30 days, or as long as one year, but the most common time period for name reservation is 120 days. 

The cons to reserving a business name is that:

■ Business name reservation is not a guarantee, as another person is able to use the name as soon as the reservation period expires. 

■ Business name reservation only applies to the state in which it has been reserved. This means that other people could use the chosen name in other states if it is not reserved there. This is a large con for larger businesses seeing that it may negatively affect their branding. To prevent this, larger businesses would need to reserve names on a large scale, which may prove to be extremely time consuming and expensive. 

■ Business name reservation is an unnecessary expense seeing that it does not contribute to business formation costs and is non-refundable if the name is taken by someone else after the reservation period has ended. 

Registering a business name

Once a business name has been selected and the business is ready to be established, entrepreneurs should register their business name.

There are four different ways to register a business name:

1. Entity name. This is able to protect the name of the business at a state level. 

2. Trademark. This is able to protect the name of the business, its goods, and services at a national level. This means that businesses in the same, or similar, industry would not be able to use the trademarked name. 

3. DBA. This stands for “doing business as” and is legally required by some states. DBA’s do not provide legal or limited liability protection, but they do allow the business owner to name businesses under a different identity. 

4. Domain name. This is required if a business has a website and once registered, no one else will be able to use it. 

The takeaway

Naming, reserving and registering a business name may seem intimidating to entrepreneurs. This is not the case if entrepreneurs follow state regulations when naming and if they use a business name reserving service. 

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