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LawSmart's Guide to Naming Your Business

Posted by Anonymous

Naming your company can be the most fun but also the most crucial part of the beginning stages of your venture. There are really two names to consider. The first name is the one that will be known to the public and you want this name to flawlessly embody your product, your purpose and your passion. It should be clever, original and most importantly, memorable. The second name, the more official name, will be some variation of the first but will be used to describe exactly what type of entity you are and will appear on any and every legal document involved with your business. For example, what the world knows as Costco is legally named Costco Wholesale Corporation. Here are five steps to help guide you when naming your new business.


1. Brainstorm
        At this stage you are simply developing a name that will easily convey the core values behind your product or service. You want it to be simple yet descriptive, and broad yet meaningful. People should be able to pronounce the name with ease and the name itself should communicate enough so that little explanation is needed after the initial introduction. Keeping all of this in mind, remember to leave room for growth. Even if you think your company will remain a small, niche business you never know what can happen. A name that is too specific can limit even unforeseen endeavors, and why risk it?

        Write down every idea you come up with. Sometimes different combinations of words will show themselves to you on paper before you can even think them up. Narrow your options down to about ten names that you feel exemplify your business and move on to step 2.


2. What kind of entity are you?
        As an entrepreneur, you are probably aware whether you are a sole proprietor, a partnership, a limited partnership (LP), a limited liability partnership (LLP), a limited liability company (LLC), a corporation, or a professional corporation (PC). The state and local government require different things of different entities and naming your business is no exception. If you are not sure what kind of business structure you wish you to follow, here is a very general overview of each (speaking with a lawyer is always recommended before making such a decision).

 Sole Proprietor: owned and run by one individual; there is no legal distinction between the owner and the business.

Partnership: more than one owner shares the profits and losses of the business equally. The partnership structure does not incur a tax on profits before they are distributed to the owners. Owners of a partnership may be exposed to greater personal liability than they would  as shareholders of a corporation.

LP: only one partner is required to be a general partner, which means they are liable for the partnership's debts, have management control and share profits in a predefined proportion. The general partners pay the limited partners a return on their investment, the nature and extent of which is usually defined in the partnership agreement.

LLP: all partners have limited liability. One partner is not responsible for the misconduct of another. The profits of an LLP are  allocated among the partners for tax purposes.

Corporation: a completely separate entity from owners, shareholders and employees. All owners and shareholders have limited liability and control of the company is placed in the hands of a board of directors.

LLC: share characteristics with both partnerships and corporations. Like corporations, owners have limited personal liability for the debts and actions of the LLC. Like partnerships, they provide management flexibility and pass-through taxation.

Professional Corporation: a corporation formed for the purpose of conducting a profession which requires a license to practice, including attorneys, physicians, dentists, certified public accountants, architects, and real estate brokers. Most states provide for such corporations under special statutes which allow the corporation to operate with a single director, who is a professional. However, unlike other corporations, the organization does not provide a shield for liability for any professional negligence (malpractice) by the licensed professionals.


3. State and Local Government Requirements
        Sole proprietorships and partnerships do not have to register their business name with the state. Limited Partnerships, Limited Liability Partnerships, Limited Liability Companies, Corporations and Professional Corporations must all register their business names with the state and are usually required to end said name with a phrase identifying which status they have chosen.
    
        Sole proprietorships and partnerships must file a fictitious name with the local city or county government if they choose to operate under a name other than that of the surname of the owner. All other entities must file a fictitious name with the local city or county government if they choose to operate under a name that is different from that filed with the state.


4. Internet Website Domain Requirements
        If you plan to market your business with a website, you will need a unique domain name. You definitely have more flexibility with this choice than you do with the state or The United States Patent and Trademark Office (USPTO), but you should try and find a domain name that is as close as possible to your business name, or at the very least the kind of product or service you are offering. People most commonly stumble upon websites through search engines like Google or Yahoo! and the more straightforward your domain name is, the more efficient this process will be.


5. Run a Trademark Search
        As long as your state government gives you the go-ahead, you may operate under an unregistered business name for as long as you like assuming that you are not infringing on anyone else's trade name. But, unless you check to see if you're unregistered name is considered infringement, you will never know; and again, we are brought back to the possibility of your company becoming wildly successful. If you do not run a trademark search, you run the risk of a costly legal battle down the road that could negate all of your hard work. The USPTO provides comprehensive research and filing information for trade marking. Although some states recognize trademarks under common law to the first company to use a name, other states require registration. Hiring a trademark attorney or a trademark search firm can help you sift through these regulations and prevent future expenses.

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