Wednesday, April 1, 2009

Use Caution When Naming Your Business

Are You Taking a Risk by “Doing Business As”?

Most states allow anyone to open a business under any name they choose, as long as it is not a protected name and they file papers in the appropriate government office to show who the true principal is behind the name. Unless you operate as a sole proprietorship in your own name (“Alex Jones, Private Eye,” e.g.), check your state laws relating to doing business under an assumed name. You will use the legal name of your business on a lot of documents and hopefully for a very long time.

Business entities such as corporations handle this with their documents creating the corporation. Others, such as partnerships and sole proprietorships, may forget to properly register their business name. This creates several risks that you can easily avoid with proper registration, such as inadvertently infringing on a name that belongs to someone else and preventing your business from suing or defending legal actions against it.

A small business woman I know set up a nice re-sale shop in a decent location. She picked a store name that was catchy and communicated the business mission. After she spent considerable money on branding, signage and advertising, she got “the letter.” Another person was using a very similar name in the same line of business years before this one opened its doors and wanted her to “cease and desist” using the name.

To be fair, the older business had little choice other than to write that letter. Failure to take prompt action to protect your trademarks and trade names eventually means you lose the right to do so. The lesson for the newer business is to register your “assumed name” before spending time and money on a name you may not be able to keep. The act of registration is not a perfect guaranty that you will have no problems, but the process includes a search for similar names already registered and helps identify potential problems early on.

Be careful, however. In some states, there are both state and local assumed name registries and searching one does not include a search of the other. Plus, many counties are still not digitized, requiring a manual or paid search in each county where you intend to do business.

Filing a certificate of assumed name in your county and or with the state before you invest in branding your business could save money, potential damage to your reputation and precious time away from your core business mission just when you are getting off the ground. It is far less expensive to do the searches early and get your name reserved than to fight legal battles or pay to re-brand a new business.
Bethany Laurence has a nice article on other types of registrations on the DirectoryM site. As Ms. Laurence mentions, the U.S. Small Business Administration has a helpful site for small businesses and a specific area for this topic here.

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