Selecting a Business Name

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The following legal issues should be addressed when selecting a name for a business:

• Is the name available in the states where the business will be organized and in the other states in which it intends to qualify to do business as a foreign entity?
  
  
• Is the name contains the required terms for the type of business entity (corporation, incorporated, LLC, etc.)?
  
  
• If the entity's name is to contain words denoting that the entity is in a regulated industry, does the name been require approval by a regulating body (The word Insurance typically requires approval of the Insurance Commissioner. The word "Banking" typically requires approval of the Banking Commissioner)?
  
  
• Is the proposed name in any way deceptively or confusingly similar to a trademark or service mark already in the marketplace?
  
  
• Should the name be registered as a trademark or service mark?
  
  
• If the business name is desired as an Internet domain name, is the domain name available?

Name Availability

State laws typically require that a business name cannot be identical or confusingly similar, in other words deceptively similar, to the name of another business organized (or registered as a foreign entity) in the same state. Accordingly, when organizing a new entity or registering it in a foreign state, the primary task to be undertaken is determining whether the name is available in all target jurisdictions.

Name availability may be checked by:

• A service company to run a name availability check in each state (and reserve the name if desired - see below).
  
• LeapLaw's Corporate Connection lets you check names for availability quickly in all the states that provide for name availability online.

Name Reservation

When the name has been selected and is available, you may want to reserve the name if organizational documents will not be filed immediately. Names may be reserved in most states for 30 days or more, usually for a nominal fee.

NOTE: Check LeapLaw's 50 state pages for state specific information regarding name reservations.

Name reservations may be filed by your preferred service company or online (with a credit card) at certain state web sites. Links to state web sites offering online name reservation can be found at LeapLaw's Corporate Connection.

On the other hand, if the organizational filing will be made immediately, it may be determined that reserving the name is not worth the fee (ranging from $30 - $75.00). It is also important to note that in some states the reservation process can take longer than you plan to take to file the actual organizational documents. For instance, in Delaware a $75.00 fee is incurred in order to reserve an LLC name and may take three days to confirm.

In states that do not provide for name reservation, it may be appropriate to form a name-holding subsidiary so that the name remains available for future use in that state.

Best Practice Tip: If the same service company that reserved the name is not used to do the organizational filing, the filing will be rejected because the name will appear on the state's records as reserved by the first service company, and you will need to ask the first service company to release the name. Using the same service company to do the filing as the one that reserved the name will avoid this delay and confusion.

Name Conflicts

A name conflict arises when the secretary of state deems a proposed business name to be deceptively or confusingly similar to the name of another business entity already registered in the state. For purposes of business name conflicts, there is usually no distinction made between corporate, limited liability company, business trust or limited partnership names. Checking a few variations of the proposed name at the same time may speed up the process if a conflict arises.

Generally, secretaries of state have full discretion as to whether two names are "deceptively similar". New Hampshire, for example, is notoriously prone to conclude that two names are deceptively similar, while Delaware, at the other extreme, generally accepts a name containing a component that is identical to a component of an existing registered business name, so long as a distinctive adjective modifies the proposed name. Most states' policies lie somewhere between those of New Hampshire and Delaware, but there is no common standard among the states.

If a name is deemed to conflict with a business name currently on file, options for curing the conflict include the following:

(1) If the obstructing entity is affiliated with the new entity, submitting a simple letter of consent signed by an officer of the obstructing entity may be acceptable. Check with your preferred service company or the secretary of state's office to confirm.

(2) If the obstructing entity is unaffiliated with the new entity, a letter of consent from an officer of the company may still be acceptable as far as the state is concerned. However, since an unrelated business, particularly if it is active, has no incentive to consent and may actually object to the new use of the name, this may be unsuccessful and in any event may be time-consuming and expensive;

(3) Adjusting the chosen name by adding an additional word or two may be acceptable as in Delaware.

(4) If the filing is a foreign qualification, the entity may adopt a fictitious name to be used within the state of qualification (see below).

(5) If there is no practical alternative, another name must be selected.

Trade names, Assumed Names and Fictitious Names

A business entity may desire to use an assumed, trade or fictitious name (also known as a "d/b/a" or "doing business as" name) in addition to the legal name listed on its organizational document. A fictitious name may be necessary to open a division, engage in and identify a different type of business or to resolve a name conflict in a state in which it chooses to qualify. A directors' resolution authorizes the use of an assumed, trade or fictitious name and registration filings are made at the local, county or state level depending upon state law.

Forms may be available at LeapLaw's Intellectual Property Connection or through your preferred service company. Trade names may or may not be registered as trademarks with the U.S. Patent and Trademark Office (USPTO) or secretaries of state, and are generally protected under state laws regarding unfair competition.

Some states such as California and Arizona require publication of assumed names. Your service company may make these publications automatically along with the filing, but you should confirm that as well as checking the cost of the publications (which may be several thousand dollars) prior to authorizing the filing. NOTE: In some states, publication notices are required for up to six weeks. Therefore, charges may be significant and invoices for several thousand dollars can arrive months after the filing.

Fictitious name filings are valid for five years in most states and are generally renewable. Some states require that forms be filed when the name has been abandoned as well. Local law should be consulted.

Best Practice Tip: Certain words may not be contained in an assumed name, such as Corporation, Corp., Inc., Limited and other terms that connote incorporation or some other organized entity.

Name Components Indicating Entity Type

State laws also provide that corporate names must contain certain words such as "Corporation", "Incorporated" or "Limited" or variations thereof in order to notify the public that the owners of the entity have limited liability for its obligations. "Club", "Association", "Fund", "Foundation", "Institute", "Society" or "Syndicate" may also be acceptable in certain states. Limited partnerships and limited liability companies are also generally required to be identified by such designations as "LP" and "LLC".

Regulated Names

Certain words are barred from use as part of a business name without prior permission of certain agencies. For instance, "Bank", "Finance", "Banking", "Trust" and similar words may require approval from the state's banking commissioner prior to filing with the secretary of state, while the word "Insurance" in a business name may require approval of the state's insurance commissioner. Other restricted words include "College" and "University". State law should be checked whenever a descriptive word is expected to be included in a business name.

Trademarks and Service Marks

A distinctive word, name, symbol, picture or combination thereof affixed to products in order to uniquely identify their source is a trademark. Packaging, color combinations, building designs, product styles, and overall presentations can also be considered trademarks so long as they are sufficiently distinctive.

A service mark is any word, name, symbol, picture or combination thereof used by a business in commerce in sales and marketing efforts to identify and distinguish its services from other business services available in the same market. Service marks distinguish services rather than products.

While the USPTO provides a nationwide system of trademark and service mark registration, a trademark or service mark does not have to be registered with the USPTO in order to establish common law rights to the name. The right to use and register a service mark will ultimately rest with the business that first actually used the mark in commerce or filed an application with the USPTO. The symbols"TM" and "SM" may be used whether or not the mark has been registered and in fact indicates the business' claim to the mark.

It is important to realize that the use of a business name may constitute trademark or service mark infringement even though a secretary of state accepts the name as free of conflict. For instance, "Michael Jordan Inc." may be available in the Commonwealth of Massachusetts, but Michael Jordan's enterprise might still have a trademark infringement claim against another company's use of the name in Massachusetts.

Accordingly, it is usually prudent to perform a full trademark search at both the federal and state levels before settling on a business name.

A determination should also be made early as to whether the new entity will itself apply for trademark or service mark protection. More information on trademarks and service marks, including filing procedures, may be found in LeapLaw's Trademark and Service Mark Best Practice Summary.

Domain Names

Domain names are registered web site addresses or "URLs". The following seven top level domain name indicators have traditionally been used: .COM for business domains; .EDU for educational institute domains; .NET for network domains; .ORG for organization domains; .GOV for government domains; .INT for international domains and .MIL for military domains. Internet Corporation for Assigned Names and Numbers (ICANN) is a non-profit organization formed to review the Domain Name System and make available a more competitive choice of domain names. To that end, two new top level domain name indicators have been established recently: .INFO, which represents informational sites and carries no restrictions on use but has a minimum registration period of two years; and .BIZ, which can be used only for "bona fide business or commercial use" and also has a two year minimum initial registration period. On the horizon are two additional top level domain name indicators: .PRO for professional business such as medical and legal practices, and .NAME, an unrestricted domain name for personal use.

Registering Domain Names
When registering domain names, it is best practice to reserve all possible applicable domain name indicators if the domain name will include the main corporate name. Domain names may be checked and obtained at Network Solutions. Network Solutions WhoIs can assist in determining who currently owns a particular domain name.

Checking the availability of the domain name while checking the business name availability at the state level and performing trademark searches is good practice if the entity being incorporated is to bear the name that will be used in the marketplace to identify the business.

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Related Best Practice Summaries