The Difference Between Business Legal Name and Trade Name

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As a business owner, the first thing you need to do is to choose a name for your business. You can use your legal business name to operate, or you can run your company under a trade name.  So, what is the difference between these two names? Read on to learn more about business names and trade names and how they compare.

Business Names and Trade Names

The name you choose can make or break the success of your company. Of course, there are many factors that affect the success of your business. However, your business name is one of the more important factors. Your name is one of the first things potential customers notice, as it serves to connect them with your products or services. Your company is more likely to be successful when you select a catchy name. Whatever you decide to call your company, it is advantageous to know the differences between a business name and your trade name. To assist you in this, we have compiled essential information on both business names and trade names.

Business Name

Your business name is simply the legal name of your business; the official name of the person or entity that owns your company. Also, this is the name you use on business documents and government forms. The legal name of your business may vary depending on the type of business structure. If you are a sole proprietor , the legal name of your business is your full name (Bob Smith, for example).  You can include other words with your full name, such as Smith’s Ice Cream Company. Keep in mind, however, that sole proprietors must include their full legal name. Conversely, if you own a general partnership, the business name is usually a combination of the partnership owners’ last names. What’s more, the partnership agreement has to include these names. Corporations and LLCs ( Limited Liability Companies ) are required to establish their legal name whenever they register the business. Unlike other business structures, the legal business names of corporations and limited liability companies do not have to include any owner’s name as a business name.  Certain states require corporations and limited liability companies to include either “corporation” or “LLC” in their legal names; for instance, The Bob Smith Ice Cream Corporation or Bob Smith Ice Cream, LLC.

Trade Name

If business owners want to operate under a name other than their company’s legal name, they can switch to a trade name. Trade names don’t have to contain additional words or legal phrases like corporation or LLC. For example, the trade name of a company might be Jerry’s, but their legal business name is Jerry’s Corporation. Companies can choose to make their trade name and business name the same. You can call the trade name whatever the DBA is (Doing Business As) filed as. The DBA name is the name seen by the public. Think of it as a nickname for your company. Companies can use their trade names or DBA names to aid in sales and marketing to help attract more customers rather than their legal business names. If you want to operate under a name different from the legal company name, you will need to register your business’s trade name. Each state and county has different DBA registration rules. Some require that you pay a fee and submit an application for each DBA that you want to register.  For more information on registered trade names, please consult your jurisdiction.

The Pros and Cons of Using Business Name vs Trade Name

Usually, a company will have a legal company name and trade name at the same time. As mentioned earlier, legal names appear on legal documents and government forms. Trade names, on the other hand, usually appear on marketing material. It is up to each company to decide whether it’s best to use a trade name rather than a legal business name. There are advantages and disadvantages to using DBA or trade names.  So before you settle on using a trade name over your legal name to conduct business, please consider the following pros and cons concerning trade names.

Pros of Using a Trade Name

  • If you have multiple products, it helps to distinguish the brand 
  • Lets you further clarify your business purpose 
  • Registered trade names are usually cheap 
  • Provide more credibility for your business 

Cons of Using a Trade Name

  • Usually only valid in the jurisdiction where you submitted your application (if you want to operate elsewhere, you may need to apply for another)
  • Unless you register a trademark, you have no exclusive rights to the name 
  • A potentially complicated application process

Take the time to consider these factors to help you make the best decision for your small business.

Selecting Your Business Name

Deciding on a name is not as easy as it sounds. For starters, the name you choose tells consumers a lot about what kind of company you are. Therefore, you need a unique, memorable, and compelling name. To help you choose an excellent name for your business, consider the following:

  • Think of ways to tie in your company’s message with your business name
  • Choose something that is easy to pronounce and remember 
  • Avoid using difficult or lengthy words 
  • Make sure that another company does not already use the name. You will need to perform an online search, check the domain name, lookup trademark information, and so on.
  • Ask colleagues and friends for feedback

Choosing a name to operate your business under is a significant step. Moreover, choosing the right name requires some trial and error, patience, and typically lots of time.  List the names of the companies you like and determine if they are available. If the name is already in use, start over and try again. Once you settle on a name for your business and check whether it is available, you will want to register the name in your state.

What If You Need to Change Your Name?

As your organization grows, you may find that you want (or need) to change your company’s DBA name. Perhaps you are planning to add a new product line. Or maybe a new partner is joining your company.  Regardless of the situation, sometimes you need to adjust the company name to better reflect any changes made within your organization. Changing your company’s name requires you to do some work. Moreover, the process is likely to vary depending on your business structure.  You will typically need to follow the steps listed below in order to change your company name.

  • Modify business documents such as leases, contracts, bank accounts, agreements, and loan documents to include your new name
  • Contact your county, local, or city governmental agency to modify the name on your business license and permit 
  • Get in touch with the Secretary of State to let them know of the DBA change (unless you are a sole proprietor) 
  • Update your corporate website, logo, and other brand materials with a new name 
  • Inform federal and state tax agencies that you changed your business name
  • Get in touch with your bank to change the name on your account 
  • Check whether the new name is available 
  • Inform the IRS of your new DBA

Please note : If you are a sole proprietor, you must submit a new DBA registration.

In Closing

Starting your own business is a major milestone in life and one that requires a lot of work. And once you get your business off the ground, there is equally a lot of hard work that goes into running it . While the time and effort are often quite substantial, the rewards can far outweigh them in the end. Therefore, it is important to keep your focus on your vision for your company and maintain it to the finish line.  If you’re finding it difficult to get started, we recommend you explore our many invaluable articles on small businesses. We have compiled a dedicated resource that is jam-packed with useful information and insight into the world of small businesses. As always, be sure to contact us if you lack the funding needed to open your own small business. Here at Seek Capital, we specialize in securing loans for entrepreneurs and business owners. In fact, we have successfully funded over $400 million since 2015. We are delighted to assist you in seeing your vision through to completion. If you are interested in exploring your loan options, click here to get started. Even if you are an established small business owner, we can help you get the funding you need, whether it’s for advertising, inventory, payroll, or anything else.  If you have any questions in the meantime, please don’t hesitate to contact us. Our loan specialists are always here to assist you with all of your small business loan needs. Sources: Sole Proprietorship | The US Small Business Administration | IRS: Limited Liability Company (LLC) | How to Register Your Business's DBA Name |

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