Naming Your Business

Naming your business is a personal and important decision to make. Your “name” is an important aspect of the brand of your business and will set the tone of your business’ personality.

Here are some things to consider when naming your business which are often overlooked:

1.  Recognize the difference between your “corporate” name and your “trade” name.  Your corporate name provides your company an identity for the state and federal government.  Some business owners choose to use this same name to represent themselves to their customers.  This is a mistake.

In all cases, we recommend the use of a “trade name”.  Registering a tradename is very simple to do and is clearly the “thinking man’s” solution to the name game.

Here is how this rolls:  Register your company with the federal and state government and use a relatively generic or general name – such as “Johnson’s Enterprises, Inc.”  Then, register a tradename with the state (and the federal government if you choose although it is typically not necessary) such as “Tim’s Wild Tacos”.

Your business is now “Johnson’s Enterprises, Inc dba (doing business as) Tim’s Wild Tacos.”  You will provide the tradename registeration information to your bank and any other service providers (accountant, attorneys, etc) to prove its existence.  This, in effect, allows you to operate interchangeably with either name.  Your clients can make checks out to “Tim’s Wild Tacos” while your merchant account for credit cards may be registered under “Johnson’s Enterprises, Inc.”

Why does this matter?  For several reasons:

a.  Assume that after two years in business, “Tim” decides that the market for Tacos is saturated and that he wants to re-invent his restaurant as a Pakistanti restaurant.  By using the corporate name in conjunction with a trade name, this transition is simple.  Tim will register a new trade name with the state called “Ahmed Restaurant”.  Tim provides this second trade name (he doesn’t even have to cancel the Tim’s Wild Tacos trade name) to the bank and his other service providers and . . . that’s it done.  Nothing else has to change (of course other than the minor detail of altering the restaurant’s decor, menu, etc).  All existing business relationships can remain exactly as is.

b.  Perhaps Tim doesn’t want to shut down his Taco business but wants to expand with a Pakistani restaurant in another location.  The addition of the trade name will allow Tim to run both establishments under the same corporate identity.  This will simplify his operations substantially.

c.  Selling the business – When / if  the time comes to sell “Tim’s Wild Tacos”, the process is much simpler when using the trade name option.  As most sales of this type will be “asset sales”, the buyer will create a new company but in all likelihood, he will want to maintain the goodwill associated with the existing name.  Therefore at closing, Tim will simply transfer the trade name “Tim’s Wild Tacos” to the new owner’s company (states have a standard form for the transfer of a trade name).  Nothing changes in Tim’s company – it remains a viable entity with all existing business relationships in tact.

If the actual corporate name was Tim’s Wild Tacos, Inc, the process would be a bit more complicated.  Now at closing, Tim must change the name of his business to allow the new owner to successfully register the tradename – “Tim’s Wild Tacos” (the state would reject their registration prior to closing because it would conflict with an existing business name.

This interaction between the corporate name and the trade name sounds a bit more complicated than it actually is.

BOTTOMLINE:  We highly encourage you to register your business with a name that is relatively generic and then register a trade name that your customers and clients will come to know you by.

2.  Resist the temptation to name your business after yourself – either your first or your last name.  (If Tim from the above example was our client, we would try to steer him clear of this name choice.)  Although, there is something alluring about using the family name in the business or your own first name – the pitfalls, in our opinion are not worth it.

By naming the company after you, the owner – you are signaling to your clients that “you” are the business.  In time, you will observe that clients will insist to speak with you directly on all matters related to their involvement in the company.  This is true with service providers, partners, media, etc.  We want you to choose, on your terms, the situations for which you become personally involved.  However, as your company grows, we want you to be able to have a highly trained and competent staff handle matters with increasing responsibility. They will grow tired and demotivated of constantly fielding requests to talk to you.  This phenomena virtually disappears when the company name does not include your name.  (Of course, if you advertise yourself as the “owner” on your website, business cards, etc – you may be forced to deal with it )

3.  Avoid any and all attempts (regardless of how subtle) to leverage the goodwill and success of an existing company.  It creates horrible kharma and reeks of desperation and unprofessionalism.  Not to mention – if you do become successful (or maybe before then), you are leaving yourself wide open for legal problems.  Example, Tim’s taco restaurant should not be called “Taco Bellair” . . even if the play on words might seem appealing to the residents of southern California.

4.  Do your research.  Using your state’s public records (available online in most, if not all, states), perform searches on existing businesses to see if there is already a business with a name (or a trade name) that is similar to what you had in mind.  DO NOT assume that because the state accepts your registration request that there is no conflict.  The state should attempt to avoid conflicts however, the state’s threshold of “different” may vary from the company whose name yours is similar to.  That difference could result in a legal battle that you want no part of.

5.  Look ahead.  Do NOT limit your search to your state only – unless you are 100% positive that you will never move or expand the company to another state.   Imagine creating a highly successful and profitable company in Los Angeles and creating a reserve of funds that allow for your much anticipated expansion to Chicago and New York.  Then you realize that your business’ trade name is already being used in both Illinois and New York by someone else. . . .oops!

6.  URLs are important.  Avoid having to host your site at because is already in use.  We have seen business owners neglect considering this consideration when naming their business and the reality of the matter is that URL strength matters.  Some are preaching the acceptance of .biz, .net, etc.   We strongly recommend that a clean crisp “.com” that contains your companies name directly is the best approach.

Have wonderful weekend!

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