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A business name is a valuable asset. It helps potential customers find a company and understand its purpose. In some cases, it’s the first thing that connects customers to a business’s products or services.
Considering the importance of a company’s name, it’s no wonder that people take their time brainstorming various ideas when planning a business before settling on a final name.
Many people don’t know that plenty of businesses have legal names that are different from their commonly known names. These commonly known names are called trade names or “doing business as” (DBA) names.
In this article, we’ll discuss the differences between trade names and legal names, and outline where each applies.
What is a legal business name?
A business’s legal name is the official name that appears on government and legal forms. Generally, it’s the name of a person or entity that owns a business.
Often, legal business names differ from the names that people associate with a business.
Like how people’s legal names identify them, businesses’ legal names identify and differentiate them for the government. When a government body needs to communicate with a business, it uses its legal name.
Business structure and legal names
A business’s legal name may be affected by its type of business structure. Let’s take a look at the following examples.
Unlike other business structures, sole proprietorships are not separate legal entities. Therefore, a sole proprietor’s legal business name is their own legal personal name (e.g., John Smith). Sole proprietors can operate under a trade name, but doing so does not create a separate legal entity.
When partners make a Partnership Agreement, they may assign their general partnership a legal name within the contract. If they don’t come up with an original legal name for their general partnership, they usually use their last names (e.g., Smith & Jones).
If partners conduct business using their combined personal names, they don’t have to register it. If they use a different trade name, they will have to register it.
LLCs and corporations
For limited liability companies (LLCs), business owners choose a legal name and file it with the state when submittingArticles of Organization. The same goes for corporations when filing Articles of Incorporation.
For these business structures, legal names must be approved by the appropriate office, such as the secretary of state, before the name is registered.
Requirements for legal business names
Sometimes there are requirements for the legal names of certain business structures. As previously discussed, the legal business name of a sole proprietorship is automatically the proprietor’s legal personal name.
For LLCs and corporations, there are different requirements. A limited liability company’s legal name usually must end with one of the following:
- Limited Liability Company
- Limited Company
- Ltd. Liability Co.
- L.L.C. or LLC
- L.C. or LC
A corporation’s legal name usually must end with one of the following:
- Corporation or Corp.
- Incorporated or Inc.
- Company or Co.
- Limited or Ltd.
What is a trade name?
A trade name is what a business uses to operate and interact with customers. In other words, a trade name is what a business presents to the public.
Trade names are similar to people’s preferred names. For various reasons, some people go by a preferred name that differs from their legal name. It’s no different with businesses.
Trade names are not mandatory, and some companies may even find them unnecessary. In that case, a business can choose to use its legal name as its trade name. However, many businesses of all types use trade names that differ from their legal names.
A trade name is sometimes referred to as a:
- Fictitious name
- Operating-as name
- Alternate name
- DBA name
If a business owner wants to assign their company’s trade name to someone else, they may use an Assignment of Trade Name contract. Assigning a trade name may occur during the purchase of a business.
What does DBA mean?
DBA stands for “doing business as.” A DBA name is another way of referring to a company’s trade name.
Why do businesses use trade names?
Often, businesses use trade names for advertising and sales purposes. Unlike some legal names, trade names don’t need to include specific words or abbreviations relating to business structure, such as Corp or LLC. Therefore, trade names are usually less wordy, making them ideal in marketing.
For example, a company with the legal name “Smith’s Moving Services Limited Liability Company” may want to use “Smith’s Moving Services” in an advertisement or on signage because it’s succinct and catchy.
Also, companies use trade names to differentiate their brands. Consider Gap, Banana Republic, and Old Navy retail stores. These brands are all trade names under the Gap Inc. corporation. Using trade names allows Gap Inc. to function using multiple brand names while operating as one corporation.
Registering a trade name
Once a business has decided that it will operate under a trade name, it should register the name with the appropriate state, county, or city office.
Requirements for registering a trade name vary by state and office. Also, requirements can vary by business structure.
Business owners must conduct their own research to find out if they should register their trade name. One of the best ways for a business owner to find out is to visit their County Recorder’s office and ask. For more information about choosing and registering a business name, visit the U.S. Small Business Administration.
Please note that registering a trade name doesn’t usually provide legal protection. In some states, multiple businesses can operate under the same trade name even if one business has it registered.
Trademarks, on the other hand, can give businesses the exclusive right to their trade names.
Trade names versus trademarks
Although they sound similar, trade names and trademarks are not the same. A trade name is a company's publicly used name, while a trademark legally protects an aspect of the company's brand.
A trademark is a type of intellectual property protection. Trademarks can protect various things used to distinguish a product or service, including words, designs, and colors.
When registered properly, a trademark-protected word or name can be used exclusively by its owner. Trademark-protected words and names are easy to spot because they’re labeled with the trademark symbol (™) or registered trademark symbol (®).
Registering a trademark is a separate process from registering a trade name. Trademark registration is done at the federal level, not the state level.
Can you trademark a trade name?
A trade name is sometimes, but not always, entitled to protection under trademark laws. To be eligible for trademark protection, a trade name must identify and distinguish a business’s product or service. Also, it can’t be too similar to any other registered trademark.
For example, Apple Inc. operates under its trade name, Apple. The trade name, Apple, is eligible to be trademarked because it’s distinctive. If a business’s trade name is too vague, such as The Computer Store, it’s probably not eligible for trademark protection.
To get trademark protection for a trade name, a business must apply for a trademark with the United States Patent and Trademark Office (USPTO).
Trade names: Pros and cons
Trade names have their advantages and disadvantages. If you’re a business owner, you must consider their pros and cons before deciding to use one.
- Trade names allow limited liability companies and corporations to operate without legal naming conventions (e.g., LLC, Corp., etc.)
- Trade names allow sole proprietors to clarify their business’s purpose (e.g., Sam’s Painting Services)
- Trade names are quite affordable to register
- Trade names can help business owners brand and market their companies
- Trade names can help differentiate a business’s brands
- Using and registering trade names doesn’t give business owners exclusive rights, unless registered as a trademark
- Registering trade names in multiple jurisdictions can be extensive and take time, unlike trademarks which are federally and sometimes internationally recognized