Put yourself in this scenario: you’re ecstatic about your new business, and you’re excitedly telling everyone you know about your plan. Suddenly, someone asks what your business is called. When you give them an answer, the last reaction you want is awkward silence or laughter. No matter how innovative your business idea is, if you pick the wrong name for your business, you’re in trouble…..Story continues….
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Using one or more fictitious business names does not create additional separate legal entities.The distinction between a registered legal name and a fictitious business name, or trade name, is important because fictitious business names do not always identify the entity that is legally responsible. Legal agreements (such as contracts) are normally made using the registered legal name of the business.
If a corporation fails to consistently adhere to such important legal formalities like using its registered legal name in contracts, it may be subject to piercing of the corporate veil. In English, trade names are generally treated as proper nouns.For consumer protection purposes, many U.S. jurisdictions require businesses operating with fictitious names to file a DBA statement, though names including the first and last name of the owner may be accepted.
This also reduces the possibility of two local businesses operating under the same name, although some jurisdictions do not provide exclusivity for a name, or may allow more than one party to register the same name. Note, though, that this is not a substitute for filing a trademark application. A DBA filing carries no legal weight in establishing trademark rights.In the U.S., trademark rights are acquired by use in commerce, but there can be substantial benefits to filing a trademark application.
Sole proprietors are the most common users of DBAs. Sole proprietors are individual business owners who run their businesses themselves. Since most people in these circumstances use a business name other than their own name, it is often necessary for them to get DBAs. Generally, a DBA must be registered with a local or state government, or both, depending on the jurisdiction. For example, California, Texas and Virginia require a DBA to be registered with each county (or independent city in the case of Virginia) where the owner does business.
Maryland and Colorado have DBAs registered with a state agency. Virginia also requires corporations and LLCs to file a copy of their registration with the county or city to be registered with the State Corporation Commission. DBA statements are often used in conjunction with a franchise. The franchisee will have a legal name under which it may sue and be sued, but will conduct business under the franchiser’s brand name (which the public would recognize).
A typical real-world example can be found in a well-known pricing mistake case, Donovan v. RRL Corp., 26 Cal. 4th 261 (2001), where the named defendant, RRL Corporation, was a Lexus car dealership doing business as “Lexus of Westminster”, but remaining a separate legal entity from Lexus, a division of Toyota Motor Sales, USA, Inc. In California, filing a DBA statement also requires that a notice of the fictitious name be published in local newspapers for some set period of time to inform the public of the owner’s intent to operate under an assumed name.
The intention of the law is to protect the public from fraud, by compelling the business owner to first file or register his fictitious business name with the county clerk, and then making a further public record of it by publishing it in a newspaper. Several other states, such as Illinois, require print notices as well.
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