Marking the difference between a legal entity name and a US trademark
Article 4 minute read

Marking the difference between a legal entity name and a US trademark

08 January 2015

A business entity’s name is one of its most valuable assets; it can affect the business’ sales, its reputation, and even its chance for success – but it doesn’t make it a trademark. Our US expert looks at the extra steps needed for trademarks in the States.

One of the first and most important decisions a business entity’s owners or managers make after deciding to form the entity is selecting its name. Choosing the name for a business entity may not be its lawyer’s responsibility. However, once a client has proposed a name, its lawyer’s advice is vital to ensure: 

  • compliance with the various laws that restrict business entity names, and
  • completion of all steps needed to protect the client’s rights to its name

Business entity laws and legal name selection

A “legal name” is the name that appears on the formation document of a corporation, LLC, LP or other statutory business entity. A business entity must select a legal name before it is formed. This is considered its original legal name. A legal name can be changed as often as the business entity desires during the course of its existence. However, the business entity can have only one legal name at any given time. (In contrast, a business entity can have several assumed, fictitious or trade names at one time. These are all names other than the one set forth on the formation document.)

Statutory restrictions on legal name selection

Although there is wide latitude in selecting a name, a business entity cannot choose any legal name it wants. It must take into account restrictions imposed by the statute under which the entity will be formed. These restrictions deal with three issues:

  • Most business entity statutes require the name set forth in the formation document to contain a specific word, phrase, or abbreviation indicating what type of entity it will be.
  • Many business entity statutes prohibit the use of certain words or phrases in legal names, mainly to prevent the public from being misled as to the type of business entity it is dealing with. A business entity may be unable to use a name containing a word such as “bank” unless the business entity is in the banking industry.
  • Most business entity laws provide that the business entity’s name must be available for its use, and must not conflict with the name of another domestic or foreign entity appearing in the filing office’s records.
  • Availability of a legal name at the filing offices

Upon receiving a formation document for filing, the filing office will search its database to see if the legal name set forth on the document is available. If it is not, the formation document will not be filed. Each filing office maintains its own rules and regulations for determining what makes one name distinguishable from another.

A business entity that transacts business in a state outside of its formation state must qualify to do business in that state. The name of a qualified foreign business entity must meet the same requirements as a domestic business entity. If the legal name does not comply - for example, because there is a conflict - the business entity will typically have to qualify and do business under a compliant fictitious name.

A legal name is not necessarily a trademark

A (trade)mark identifies a business entity’s goods or services. A legal name identifies the business entity itself. However, a legal name may be a mark if the business entity uses it in commerce to identify the business entity’s products or services.

Trademarks are governed and protected by federal statutes, state statutes and common law. These laws impact business entity name selection in two main ways.

First, a business entity will want to select a name that does not infringe upon another entity’s or person’s trademark rights. Second, not all marks qualify for protection under the trademark laws. Therefore, if the business entity is going to use its name as a mark, it will want to select a non-infringing name that will qualify for protection.

Conducting a trademark search can help. This step is designed to uncover any names or marks already in use that are identical or similar to the client’s proposed legal name and that could create trademark problems for the business entity should it use that particular name.

Not every mark qualifies for protection under trademark laws; certain requirements must be met. For example, to be fully protected by the trademark statutes, a mark must be “distinctive” — meaning that it is capable of identifying the source of a particular good or service. Consequently, a business entity that intends to use its legal name as a mark may wish to select a distinctive name.

What’s in a name?

For a new business entity, a great deal. The business entity will probably have spent a great deal of time, money, and effort choosing its legal name.

Consequently, its lawyer will want to help it select and protect that vital asset. Lawyers who are familiar with the laws that govern and protect business entity names are in the best position to provide this assistance.

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Written by

Dan Kragt

Former Interim Regional Head and Subregional Director

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