Using Assumed Names for Your Business (Part 2)

The "Whys" and "Hows" of Having an Assumed Name for Your Business

Part 2 of a Two-Part Tutorial

Part 1

Choosing a Fictitious Name That You Can Trademark

While not all assumed names can be trademarked, many of them can. The rules governing this possibility are too complex to explore here. But fundamentally you cannot trademark a rather generic trade name. On the other hand, unusual names frequently qualify.

Why would you choose an assumed name that can be trademarked? Because it gives you greater protection against other people infringing on the use of your name. Trademarks can be registered at the state level. And as a rule, it is easier to get a state trademark than a Federal one. But state trademarks protect you only within the state's borders.

A Federal trademark, by contrast, gives you national protection. It also qualifies you to apply easily for international trademark protection in any of the nations that have signed the Madrid Protocol or with whom the U.S. has signed a treaty providing for reciprocal protection of intellectual property.

For most startups the cost and effort to trademark a company name (particularly at the Federal level) is probably unnecessary. But for some startups — especially internet businesses — this option is certainly one to consider. Given the fact that an internet business operates across state and even international lines, having a trademarked business name is often worth pursuing. One reason that you see so many unusual internet names such as Google, Yahoo, YouTube, NetFlix, or LinkedIn is that these types of names are more easily trademarked.

You should be aware, however, that when you register a Federal trademark, it applies only to specific classes of business activity. You must identify these classes at the time of your application. And the more classes you identify, the more expensive the application. Once granted, your trademark protection extends only to business activity within these classes. Thus, if you later expand into other lines of business, your trademark may not protect you.

Registering an Assumed or Fictitious Name

Any type of business — a sole proprietorship, an LLC, a corporation, or a partnership — can have an assumed name. Or even more than one. Each state has its own specific rules and procedures for registering assumed names. And some states require no registration whatsoever.

Where registration is required, it is generally done at the county level, usually for a minimal fee. (In my county, for instance, it costs $25.) You may also be required to file a copy of your county registration with the state, again for a nominal fee. Some states impose an additional requirement to register your trade name in any county in which your company has a physical presence, such as offices or outlets.

Any type of business, whether incorporated or not, can have an assumed name.

From state to state there will be differing rules as to terminology which may appear in the DBA name that you choose. One rather universal rule is that your assumed name cannot include words like “Incorporated” or “Corporation” or abbreviations like “Inc” or “Corp.” Nor can it contain "LLC" or "PLLC."

These terms imply that your DBA is in fact a legally registered name of a corporation or limited liability company, which it is not. Check with your local county government for any other restrictions that they may have.

Unique Assumed Names Are Essential

Whatever assumed name you choose, it needs to be unique in your trade area. When you establish a corporation or an LLC, the state's registrar for corporate filings will check to be certain that no other company in the state has already registered that particular corporate name or one very much like it. County governments may or may not make a similar check of local assumed names when you file yours.

If your county does not verify the uniqueness of your DBA at the time you file, you should do your own research in advance to be certain that your DBA is not already in use in that county. Should another company challenge your use of an assumed name on the basis that it had been previously granted to them, the county will probably leave it up to the courts to sort the matter out. You want to spare yourself that exposure and expense.

Increasingly counties are automating as much of the registration process as possible. They begin by posting an online list of currently registered DBAs in the county. This let's you research the availability of your proposed name easily. Otherwise, you will have to visit county government offices to do this research. Some counties are also maximizing the convenience of registering DBAs by allowing the entire process to be completed on line.

Doing Business Under Your Assumed Name

Once your DBA is established legally, you can conduct most of your affairs under that name. And you can use the same Federal Employer Identification Number (FEIN) that your business was assigned by the IRS.

One of your first moves will be to open a checking account in the assumed name. To set up your account the bank will probably require proof that your DBA is properly registered and that it belongs to a company that is duly chartered with the state. The bank will also require your FEIN (or your social security number, if you are a sole proprietorship operating without a FEIN).

The registration of your trade name is good for finite period of time. This time period varies widely. In Florida, for instance, the registration is good for five years. In Texas the period is ten years. At the end of this time you must renew the registration. Otherwise it expires and you lose the legal authority to do business under that name.

As we have noted repeatedly, the guidelines governing assumed or fictitious names, registering them, and renewing them vary significantly from one jurisdiction to another. Therefore, before you take any steps to establish a DBA, check all of the state and local regulations with which you must comply.

Part 1