Trade Name vs Legal Name: Key Differences Explained

Introduction to Business Naming

When first starting a business it's important for business owners to recognize the difference between the legal business name and a trade name. Trade names will need to be registered separately and are used for marketing, new business ventures, and other activities that can operate under the main business name. The legal business name is the actual LLC's name, will be listed on all official paperwork, and will be what is registered with the state office when forming the LLC.

Both the trade name and the legal business name are important aspects of a successful business, but they do not need to be the same. The legal business name is going to be the main reference when handling official notices from the state, important business documents, and taxes. A trade name is able to be owned by the LLC and allows the business to operate under a different name for multiple purposes such as needing a more marketable business name or taking on a different business path that does not make sense to do so while operating under the official business name.

Legal Business Name

The legal business name is what is the official name of your company. This is what is used on legal documents, official notices, and tax returns. The secretary of state will have this name on file when referring to your business entity. The legal business name must contain certain abbreviations based on the structure, such as LLC or Inc.

This name is what is used to distinguish your business from others, and all businesses are required to have one. All bank paperwork and business related paperwork will contain this registered name and will be what the state recognizes the business as.

Business Structure

The business structure, whether that be an LLC, corporation, partnership, or sole proprietorship, is one of the things that determines the format of the legal business name. Depending on the business structure, the name will need to include a designator such as LLC, Inc, or LLP when registering the name with the state you will be operating in. The business structure will also determine what kind of personal liability protection that is enjoyed by business owners when forming an official business with the state office, which is an important aspect to keep in mind when making this choice. Our customer service team are experts in these topics and can be a very helpful resource if you choose to use our services.

Trade Name

The trade name of a business, also known as a DBA name (doing business as), is a name the business is able to operate under the legal business name. This name can generally be used for marketing purposes as it does not require the LLC or Inc abbreviations. Also, this name is able to target specific target markets based on what your business is trying to do. Since this is not the official business name, this name can be shorter, more specific, and thus make it easier for customers to remember.

A trade name does not have to be the same name as the legal business name, but it still must be registered with the state and renewed yearly, or however often your specific states guidelines require. This name can be used to create a brand identity and differentiate your business.

Oftentimes, if you are planning to venture into a similar but more specific business path this is a good way to go about that. An example could be a bakery named "Jim's Bakery LLC" that is planning to open a specific shop that only sells cakes. This DBA could be called "Jim's Cake Shop". This difference can help potential customers not be confused and be aware that these are separate stores, and what the main purpose of each store is. But, they might be run by the same person under the same LLC.

Business Names and Registration

Having a registered business name is essential to help protect your company's identity and prevent others from using the same legal name. A business name will need to be registered at the state level and also be registered in each state you are conducting business in. The legal registered business name will provide protections if you are choosing an LLC or a Corporation, and allow you to have protections of the corporate veil.

A trade name, or sometimes referred to as a fictitious name, does not provide these legal protections which is why it's good to use a combination of the two names when planning to use a trade name. Registering a trade name does not give you exclusive rights to that trade name in most states, and other businesses are able to market with similar names which is opposite to how legal business names work.

If you are looking to have a specific name and exclusive rights to it, then registering your business with that as the legal name will give you these protections, and you will be able to branch your fictitious name off of that for marketing and more visibility.

Legal Protection for Business Owners

• A business owner can protect their personal assets by forming a limited liability company (LLC) or corporation.

• A trade name registration can provide some level of protection, but it is not the same as a trademark registration.

• A trademark registration provides exclusive rights to the business name and can be used to prevent others from using a confusingly similar mark.

• A business owner can also use a fictitious name, also known as a DBA name, to operate under a different name than the legal business name.

• A business advisor can help determine the best way to protect the business owner’s personal assets.