Sole proprietorships, also called "DBAs" ("doing business as"), must register their business under the owner's legal name. While some sole proprietors may do business under their legal names, such as a freelancer without the need for additional branding, most use more creative names.
For instance, a dog walking service operated by John Smith likely would have much better odds of finding customers if he promoted his business under "John's Dog Walking" or something else more descriptive than just "John Smith." Any business name that differs from the legal name is referred to as a "fictitious business name." Even something like "John Smith: Dog Walker" would differ from the actual legal name of the sole proprietorship.
But before you start doing business under a name that differs from your own (if registered as a DBA), make sure you fully understand the meaning of fictitious business names and whether it needs to registered.
Do You Need a Fictitious Business Name?
A sole proprietorship that does not take the legal name of its owner must normally register the name of the business with an agency of the state government, typically the Secretary of State's office. However, many states differ on what is considered a person's "legal name." Under Florida business law, for example, a legal name is defined as "a person's given name, or an entity that has been properly registered." This may include trademarks and service marks, in addition to the sole proprietor's given name.
Corporations, limited liability companies (LLCs), and partnerships also may register fictitious names, but they generally are exempt from the types of laws that require sole proprietorships to do so (check your local laws). There are certain advantages to doing so. An LLC selling multiple product lines, for example, may opt to register the names used for each product line in order to protect its branding.
The Rationale for Registering Fictitious Names
Why, you may ask, are the rules regarding fictitious business names so peculiar? It is really because the government wants a quick way to find out who owns a business in case there are legal problems. If your business does not take your name, then consumers who have complaints about your company may have a hard time locating you if you have not registered a fictitious business name. Also, it allows other businesses and start-ups to search for business names already in use.
Registering a fictitious business name is not only about helping consumers sue you, however. For example, if your business operates under a non-registered fictitious business name, then you, as the owner, will not be able to sign any contracts or make any enforceable agreements on behalf of your business. So, if you are planning on operating your business under a DBA name, be sure to register it.
Sole Proprietorship in California: An Illustration
Perhaps the best way to explain how the law works with regard to the registration of fictitious business names is by way of example. In this case, we will focus on a sole proprietorship in California. Keep in mind that the laws and procedures regarding fictitious business names (or DBAs) differ from state to state.
Suppose your name was Gabriel Saunders and you wanted to use "G Saunders Group" or "G Saunders Consulting" as the name of your sole proprietorship. Do you have to go through the trouble of filing a fictitious business name?
If you decided to open "G Saunders Consulting" in California, filing the name as a fictitious business name would be unnecessary. Under California laws, there is no need for a business owner to register a DBA or a fictitious business name so long as the business' name includes your last name. This is because, under California law, a business name is not a fictitious name if it includes your last name. There is no requirement that a business name include the owner's first name for the business name not to be a DBA.
However, if you decide to open your business as "G Saunders Group" in California, then you may need to file a fictitious business name with the state government. This is because the business name, specifically the word "Group," implies that you have co-workers that work with you. If your business name suggests that you co-own the company (names such as "G Saunders Group," "Saunders and Sons," or "Saunders and Associates"), then you do have to file a fictitious business name.
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As difficult as it can be to run a business, starting a new one from scratch is even more challenging. Entrepreneurs should expect to wear multiple hats as they take on a variety of responsibilities. If you have questions or concerns about registering one or more fictitious business names, you should contact a small business attorney licensed in your state. Get the ball rolling with a free case review at no obligation.