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Before deciding what to call your company, make sure you know the difference between business name vs. trading name.

Business Name vs. Trading Name, Do You Know the Difference?

As a small business owner, are you operating under a business name or trade name? The legalities and strategies behind what you call your company can be confusing. To stay competitive and compliant, find out the difference between trading name and business name features.

Business name vs. trading name

Your business’s name is the first impression customers get of your company. When it comes to what you call your business, you need to know whether you must use your business name or trade name. The difference between company name and trade name attributes vary.

What is a business name?

A business name is the official name of the person or entity that owns the company. It is your business’s legal name. You use your business name on government forms and applications.

Your business’s legal name is determined by how you set up your business. If you operate as a sole proprietorship, the legal name is your full name. You can add words that describe the kind of business you run, but your personal name must be included.

For example, your name is John Smith, and you own an insurance business. Your legal name can be John Smith Insurance.

If you are an owner of a general partnership, the business name is written in the partnership agreement. The partnership’s legal name is made up of the last names of the owners if there is not a business name stated in the agreement.

Limited partnerships, LLCs, and corporations establish their legal names when registering the business structure. The legal name is part of your articles of incorporation. The name does not have to include any of the owners’ names to be the legal name.

What is a trade name for a business?

Sometimes, a business owner wants to operate under a name other than the company’s legal name. A trade name is different from a business’s legal name. Business owners can use a trade name for advertising and sales purposes. The trade name is the name the public sees, like on signs and the internet.

Your business name and trading name can be different. A trade name does not need to include LLC, Corp, or other legal endings used for your tax entity. For example, McDonald’s is a trade name. The company’s legal business name is McDonald’s Corporation.

A trade name is sometimes called a fictitious name or doing business as (DBA) name. There are many reasons you might need a small business DBA, such as to open a business bank account, expand your products, or operate as a sole proprietor under a name other than your full name.

Bottom line: If you want to operate under a different name than your business name, you need to register a trade name.

Sometimes, a trade name can also be a small business trademark. If you use your trade name to identify your products and services, the name works like a trademark. But, registering a trade name does not protect you from others using your name as a trademark. A trade name is not a form of intellectual property. To have an official trademark, you must fill out a trademark registration.

There are trademark laws you must follow. If your trade name is similar enough to a different business’s trademark that it could create confusion, you might be infringing on that trademark. Trademark infractions can cost a lot of money, so you need to make sure you follow business naming rules.

Choosing a name for your business

Deciding what to call your business is not as easy as it sounds. The name of your company tells consumers a lot about your business. You need a name that is unique and memorable.

Before you choose a name, check the availability. You can’t use a name that another business is using. Search the internet on both state and federal databases. If the name you want is available, you can register it with your state.

Changing the name of your business

As your business grows, you might want to change the name of your business. For example, a partner joins your company or you add a new line of products. In these kinds of cases, there are several steps you should take to change the name of your company.

Step 1: Check that other businesses don’t operate under the name you want to use. Just like when you first chose a name, your new name must be different from existing business names.

Step 2: Let your secretary of state know you are changing the name of your business, unless you’re a sole proprietor. Usually, the state provides an online form for you to complete. If you operate as a sole proprietorship, file a new DBA registration.

Step 3: Notify federal and state tax agencies that your company name has changed. How you notify the federal government depends on your type of business structure:

  • Sole proprietorships: Send a signed letter stating the change to the IRS to the same address you use to file your tax return.
  • Partnerships: Write the new name on the current year’s partnership tax return, Form 1065.
  • Corporations: Write the new name on the current year’s corporate tax return, Form 1120.
  • LLCs: Single-member LLCs use the same method as sole proprietorships. Multi-member LLCs use the same method as partnerships.

Step 4: Revise the name on your business licenses and permits.

Step 5: Update business paperwork, such as contracts, agreements, leases, bank accounts, and loan documents. Also update your website, signs, and other branding materials with the new name. Don’t forget to market your new name to current and prospective customers.

No matter what you call your business, you need to keep track of transactions. Patriot’s online accounting software is easy-to-use and offers free, U.S.-based support. Try it for free today.

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