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Do I NEED to Register My Business Name?

By Edited Jul 25, 2015 0 0

What's in a Name?

A proper business name will allow your business to stand out in a competitive world. It is a major part of your business identity, and will make it easier for your customers to identify your business and what your business does. However, registering your business name does cost some money, and when you are just starting out, you may be looking for any opportunity to cut expenses.

Do I have to Register my Business Name? Maybe...

Nearly every government entity (National/Federal, Regional/State, or Local) will have a different answer to this question.  Before you skip the registration, you should first research what your government is telling you. In some states within the United States, for example, it is not a requirement to register your business name to open a business.  If you live within one of those states, you could open for business tomorrow.  An almost universal exception is when you create a 'stand alone' entity (Corporation, LLC, Partnership) that has its own tax identification.  Your state will require you to register the name of your business in these cases. This is part of the formality of creating these stand alone entities.

Sole proprietors, on the other hand, sometimes do not need to register their business name before opening their doors. In this case, the sole proprietor and the business are one and the same. Since a single person is taking responsibility for the business actions, the state will often acknowledge that the business and the person are one and the same, so there is not a need to register the name of the business.

Years ago, I started a computer consulting business once simply using my initials followed by the word 'Consulting'. Yes, this was not original, but I never registered the business name.  Its been nearly 15 years.  No one from the government has been 'here to help...'

What Happens if I Don't Register my Business Name?

In a civil and polite society, if two business owners happen to use the same business name, one of them would go to the other one's house, shake hands, introduce themselves, and explain why the other party can't use that business name.

In a litigious society, however, the business owner's lawyer writes you a letter. That letter explains why you cannot use that business name.  It will cause you you to hire your own lawyer to protect yourself from the 'damages' the other business owner 'has suffered' because the two of you happen to have the same 3 initials in your names. For you Scrabble aficionados, if your initials are ZQX (or any combination thereof), you are probably safe. For the rest of us, it could be 'pain and suffering' time, which could have been avoided for (usually) less than $100.

Do I REALLY Need to Register my Business Name? You should...

In the end, if the government is not requiring you to register your business name, then you can start your business today at little to no cost. 'Today, I am Bob's Shoe Store.'  Congrats, Bob! You could do a great job for years selling shoes to your customers, making hundreds or even thousands of people happy.

However, I was inspired to write this article because a customer of mine did not register his business name.  He has been told his bank account may be frozen, and his livelihood potentially threatened because, 40 years ago, the original 'Bob's Shoe Store' registered the name first.  'Old Bob' never gave up his rights to that name.  Now, new Bob needs to prove he has the rights to use that name, and he may not.

In the end, new Bob may turn out ok, but what will happen if new Bob loses the rights to his business name he worked 10 years to build?  What happens if old Bob decides that new Bob caused his business damage and harm? Worse still, what happens to new Bob if a judge or jury decides that for him?



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