Business names are extremely important. They are the basis around which brands are built and how your customers come to find you. They’re also necessary for every corporate transaction. Before you can do anything else, including forming your business, you must first come up with a name and ensure that it’s available for registration.
In this post, we’ll review the steps of how you determine whether a name is available with the secretary of state, how you reserve it (if necessary), and the steps you need to take to start your registration.
Defining name availability, reservation, and registration
Before going deeper into each of these topics, we first want to define what the difference between name availability, reservations, and registrations.
What is business name availability?
Name availability is a check of the potential name, either by telephone or database, from the jurisdiction in which you’ll be filing. A name availability check is a preliminary first step in determining if your preferred business name is good to use in your jurisdiction or if there’s another existing entity with that name.
It’s important to remember that when you check a name, there’s no guarantee it’s available. What can sometimes happen you’ll speak to an entry-level clerk and not an actual filing examiner, and the clerk will only look at what’s available to them on their database, but there may be another company they don’t see. Alternatively, it’s possible that a formation filing could come in, in the interim of you making the phone call and submitting your filing.
What is business name reservation?
Name reservation is a filing made with a state to protect a name for a short period of time while the client decides if they want to use the name. Depending upon the state, a name may be reserved for 30 days to one year and can sometimes be renewed. This is available in all states, except Florida.
If there’s going to be time between checking the name and actually filing the business entity, it’s a good idea to consider reserving the name. However, carefully consider whether you need to reserve a name, because in some states, it’s a clunky process. For example, in New York, once you submit a name reservation it can take two days or longer to get the name reservation receipt. That receipt must be attached to the underlying filing in order for the state to accept it. So, once you start that process, you have to wait for it to be finished.
If you’re going to be filing fairly quickly, name reservation might be unnecessary or even slow you down. But it there is going to be a lag between the name availability check and the formation of your business, a name reservation can provide some added protection.
What is business name registration?
Name registration is the formal filing of a document in a foreign state to protect the corporate name for a longer period of time. Typically, a name registration covers one year on behalf of a corporation that has filed its articles of incorporation.
The big caveat here is that you can only register your business name after the company has been formed, because you need to provide a certificate of good standing.
An example of a name registration is the company In-N-Out Burger. As they have expanded from the West Coast to the East Coast, their name has been reserved in all 50 states. So, when they’ve opened businesses in each state, their name has already been registered for that one-year period.
How to check business name availability
As mentioned above, how to complete a name availability check is pretty straightforward. You can either call the state directly to have them run the search ,or perform the search yourself using the state’s online tool if they have one available. Many states are moving to the self-serve online model, but ultimately, you should be querying the same database.
However, the selection of a name may not be as easy as it seems because all states have certain statutory provisions affecting the selection.
Name availability requirements and criteria
Every state places restrictions on words that can be used in a corporate name. Many states provide that a corporate name cannot contain any word or phrase prohibited by law for such corporation or one that indicates or implies that it is organized for any purpose other than that contained in its articles of incorporation. Most states have restrictions on the use of specific words, such as bank, finance, trust, cooperative, credit union, insurance, or savings. In a few states, these words can slow down the filing process because you might need to obtain consent from another state agency.
For example, in New York, if you wanted to form 123 Bank Street Real Estate Corporation, the word bank in the name means that you need to get consent from the Department of Financial Services, even though you can tell from the name of that entity that it is not a bank or a financial company.
In New York, that consent can take up to two months, so it’s a good practice to be mindful of these words, so you can either avoid them or plan accordingly. Knowing these words are regulated by the banking and insurance industries can help you avoid hiccups along the way.
In addition, almost all states require a “corporate indicator” in the name. A corporate indicator is a word or abbreviation that has to be included in a company’s name to indicate its legal status. Some examples of indicators are Incorporated, Limited, Corporation, Limited Liability Company, Inc., Ltd., Corp., and LLC, but the list of acceptable indicators will vary for each state.
The states also provide that the name of a corporation being organized must not be the same as, or deceptively similar to, and must be distinguishable upon the records of the secretary of state from the names of other corporations organized, qualified, registered, or reserved in the state.
Name availability vs. trademark infringement
When a state checks a name, what they’re looking at is really for their benefit. They want to make sure that when the entity is formed they’ll be able to tell it apart from another entity on their records. It does not mean that you have carte blanche free use of that name. In other words, a name availability, even though you might have a name in a certain state, does not mean that you aren’t possibly infringing on a trademark.
If you have a name that you’re going to be marketing to sell a product or a service, it’s always best practice to do a trademark search, in addition to a name availability search.
What happens if your business name is not available?
If a business name is not available, it is not necessarily the end of the road. You have options.
The secretary of state can let you know the following information:
- The name of the conflicting corporation
- The state of incorporation
- The date of incorporation or qualification
- The name and address of the registered agent and office
- Whether the state will accept a Consent to Use of Name by the conflicting corporation
- Whether the state will accept the use of a fictitious name if said name is being cleared for qualification or a foreign name change amendment
The registered agent’s name and address often the only contact on the state’s records. So, they may be your first point of contact for finding out more information about the company to potentially approach them about a Consent to Use of Name. However, any good registered agent will not give you information from their records, but could pass information on to the company about a Consent to Use of Name.
Consent to use of name
If a name is already in use, one of your options is to gain consent to use a name.
For states that permit it, a Consent to Use of Name is when the company that’s already in the state gives its consent to the company that wishes to get into the state. Not every state allows consent to use a name, and even those that do, not all the time will they have a form to provide to you to request it.
Where they don’t have a form, if the company that’s giving the consent writes a letter on their letterhead, and gives consent to the company that wishes to get in, the state will allow it through. A good example of that is in Delaware. In Delaware, it’s not uncommon that you might have a corporation that has the exact same name as a limited liability company that the owners want to form. So, if the corporation writes on its letterhead, they will permit the LLC in.
Who signs the consent is governed by what type of entity it is.
- Limited Liability Company: An LLC giving consent can be signed by a member, manager, or authorized person.
- Corporation: If it’s a corporation giving the consent, any officer for the corporation can usually sign. However, some states, like New Jersey, require a vice president or a president.
- Limited Partnership: If it’s a limited partnership that’s giving consent, it has to be signed by a general partner.
You’ve checked the availability of your business name and registered it. now what?
Name availability and registration are just the tip of the iceberg when it comes to entity management.
CSC experts who can help you navigate the corporate transactions and entity management processes, making them as seamless as possible.
Want to learn more about corporate transactions? Sign up for our upcoming webinar “UCC 201: Advanced Issues for Searchers and Filers” on Thursday, December 12, 2019 at 11 AM and 2 PM (ET). See all of our upcoming webinars here.