Choosing a business entity name is one of the first decisions a business owner must make when starting a new business. Once he decides on a name that best represents his business, he must register that name. There are two types of business entity names the owner can register: a legal name or an assumed name.
The legal name for a business entity is just what the name implies. It is the business' official legal name that is registered with government agencies. It is the name that is recognized by the Internal Revenue Service for tax purposes. It also is the name that is recognized on all government forms and business correspondence.
An assumed business entity name can be likened to a “nickname” for a business. It is an alternate name that a business chooses to use when dealing with the public. Another name for an assumed business entity name is a “fictitious name,” “trade name,” or “DBA” (Doing Business As). A business cannot just pick a name and start using it. There is a protocol that must be followed. The business must register the alternate name it intends to use. Generally, when a business wants to launch a new line of services or products, it is more economical to use an assumed name rather than structuring a new business from scratch. The exact costs to register an assumed business name varies by geographical location.
When to Register
Anytime a business owner uses a name other than his legal name, he is required to register the business name. For instance, if John Doe chooses to sell his artwork under the name “John Doe,” he does not have to register a business name. However, if he chooses to sell his artwork under the name “JD Enterprises,” he must register JD Enterprises as his legal business name. If an owner operates a business under a name that is not his legal name, he can be assessed stiff fines and penalties.
Where to Register
Depending upon the business owner's geographical location, and the structure of the business, the exact method to register a business entity name will vary. For instance, businesses entities that are structured as corporations must often be registered with the secretary of state's office. Business entities that are structured as sole proprietorships are often registered at the county level via the county clerk's office. To determine the exact place to register a business entity name, consult with your secretary of state's office or local county clerk.