What Is Business Assumed Name?

What is a business assumed name?

A business in California has the option of doing business under an assumed name. This is also called a DBA for short. Any business can have a DBA, whether it is a partnership, and LLC, a sole proprietorship, or a corporation. However, there are specific state regulations that must be followed when using a business assumed name.

Usually, these rules state that a business assumed name needs to be registered. If the company does not register properly, the state will impose fines. And hey, no one wants to pay extra money over something as simple as a name.

So what is a business assumed name? An entity like an LLC or a corporation may have a certain name in its formation documents, but they don’t want to use it in practice. The name they use in day-to-day life and in operation would be their business assumed name. But partnerships and sole proprietorships use the names of their owners as their official names. So their business assumed name will be a name other than their legal personal name. This means if the business is a gardening company, the business assumed name would be something like “Green Sprouts” and not “Dave Smith.” Much better, isn’t it?

Not long ago it was unclear whether a company could have a business assumed name. After all, it’s not the name that is on the official documents. But nowadays there is no problem with using an assumed name on contracts and in operations.

Learn more:

• How to Get a DBA in California
• How To Register A Fictitious Business Name (DBA) In Any California City.
• What is a DBA in business?

What is the benefit of a business assumed name?

It may seem a bit strange to have two names. In fact, some companies are famous for their business assumed name and not their actual name. Here are some reasons why you might want to consider having a business assumed name:

1. A company might have different subsections or products, and a single name isn’t a good reflection. What do umbrellas and purses have in common, after all?
2. Maybe the company wants to have different names in New York and California.
3. It could also be that the official name has a negative reputation.
4. If the official name is hard to pronounce or spell, customers will avoid it.

Because sole proprietors and partners will register their companies using their personal names, they may want the privacy that comes with a business assumed name.

What are the rules for a business assumed name?

States typically have specific rules about using business assumed names. Mainly, they want the business to register the business assumed name in a public filing. This is a form that lists the real name, the state in question, the location of the business, and the business assumed name.

The point of a business assumed name statute is to protect customers from companies with two names. If a consumer wants to check credit ratings, file a lawsuit, or research a company’s legal background, they will need the real name. A business assumed name cannot act as a legal mask, that is.

Only companies participating in commerce can have a business assumed name. What qualifies as doing business? Well, it is different than having a business assumed name for tax reasons. A lawyer can help a company determine whether it qualifies for a business assumed name according to the statute.

Business assumed names may also be called trade names, fictitious names, and other terms depending on the state.

When you check the specific laws of the state you do business in, you may have to look at state laws concerning unfair trade practices or consumer protection.

How is a business assumed name filed?

The way a business assumed name is filed will depend on the particular state. Some states want the filing document to be submitted to a state agency like the Secretary of State. Other states are okay with the document going to the county where the business operates or conducts business.

Some states want the company to file the business assumed name with both the state and county. Others want the business assumed name to be published in a local newspaper. If you are running a sole proprietorship or partnership, you may have to file on the county level, while corporations and LLCs file with the state.

Often, the business assumed name is valid for a few years and then needs to be renewed. However, some states do not assign a limit. If a company wants to get rid of its assumed name, it can file to cancel the name.

You may wonder how to protect your business assumed name. What if another business wants to use the same name? Some states will protect your unique name, while others will not. If they do, the filing office will check its records to make sure no one uses the same name as another business.

What happens if you do not follow the business assumed name rules?

If you try to use a business assumed name without properly filing for it, you could face consequences in the form of civil or criminal fines. Certain rules make it so a company cannot enforce contracts until it complies.

There are also potential personal consequences. The owner who is trying to negotiate contracts under an unlawful business assumed name could be held personally responsible for not revealing their true name.

What is the difference between a voluntary and involuntary business assumed name?

So far, we have discussed the assumed name a business chooses to operate under. This is different than the name a business needs to use when it operates in a different state where its name is not available.

An LLC, a corporation, and other entities can conduct business in other states. However, to do so, they need to apply to function as so-called foreign entities. According to these laws, the business’ name needs to be unique in that state. This means that if another business in the ‘foreign’ state has the same name, the company will need to pick an alternate name. So when the business registers to operate in the foreign state, it will register with both its true name and the business assumed name.

In Conclusion

A company may use a business assumed name for many reasons. It is important to register a business assumed name to avoid fines and other consequences.