One of the first steps in the formation process is selecting the corporation’s name. Naming your business may not be as easy as it seems because all states have statutory provisions affecting the selection.
Every state places restrictions on the words that can be used in a corporate name. Many states provide that a corporate name cannot contain any word or phrase that is prohibited by law for such corporation or that indicates or implies that it is organized for any purpose other than that contained in its Articles of Incorporation. Many states have restrictions on the use of specific words, such as “bank”, “trust”, “cooperative”, “insurance”, “savings”, etc. In addition, almost all states require a “corporate indicator” in the name. The corporate indicator is a word, such as “corporation”, “incorporated”, “limited”, “company”, etc., or an abbreviation of such a word, that indicates that the named business organization is a corporation.
In addition to requiring and prohibiting certain words, the states also provide that the name of a corporation being organized must not be the same as, or deceptively similar to, or must be distinguishable upon the records of the Secretary of State from, the names of other corporations organized or qualified in the state, or registered or reserved in the state. In many states, the name must also differ from the names of nonprofit corporations, limited liability companies, limited partnerships and other business entities required to register with the state.
If a corporation is going to qualify to do business in states outside of its state of incorporation, its name will have to meet the statutory requirements of the foreign states as well. Under most corporation laws, a foreign corporation’s name must meet the same statutory requirements as the state’s domestic corporations. If a corporation finds that the name it has incorporated under cannot be used in a state in which it will qualify, it will generally be required to adopt an acceptable fictitious name for use in the state.
Name Reservation, Registration, and Protection
Once the potential corporate name or names have been settled on, they may be checked with the corporation departments of the states where the corporation will incorporate and qualify. The departments will check on the availability of each name, or, in a growing number of states, the name be checked by looking on the filing office’s Internet website. When a name is found available, it may be reserved. This name reservation will keep the name available to the corporation until it completes its incorporation or qualification. The reservation period varies from state to state, although in a significant number of states it is 120 days. In some states the reservation may be renewed, in some it may not, and in some it may be renewed once.
If there are other states where the corporation may do business in the future, it may be advisable to register the name. This gives a corporation the rights to a name in that state, and prevents others from using it, even though the corporation is not doing business there. Generally speaking, a name may be registered only by an unqualified foreign corporation, and the corporation may only register the name under which it was incorporated. This is in contrast to name reservations—which may be made by any person or corporation, and which may be made for any corporate name that is available for use in the state. Registrations generally last for one year and are renewable.
Most corporation departments, in conducting name availability searches, do not check the submitted names against the names of registered federal or state trademarks, or “common-law” trademarks. However, the owners of these trademarks may claim that they have a superior right to the name. Therefore, the corporation that chose that name may be prevented from using it in commerce for similar goods or services. A trademark search may therefore be advisable to determine if such a conflict exists.