The name game

So, you’re ready to start your own business, and have the perfect name picked out for it.  Before you hang your shingle and spend a small fortune to generate name recognition and brand value, be sure that you’ve taken all the necessary steps to make sure the name of your business is truly your own.

Selecting an entity name or trade name in Colorado can be a trap for the unwary unless you know the rules of the game:

Rule 1: Always search the Secretary of State database prior to selecting an entity name.

Entity names (including corporations, limited liability companies, limited partnerships, limited liability partnerships, limited liability limited partnerships, limited partnership associations, general partnerships, nonprofit associations, nonprofit corporations, and all foreign entities authorized to transact business in Colorado) and names reserved as entity names must be “distinguishable on the records” of the Secretary of State from every other entity name and reserved name.

The naming standard was changed from “deceptively similar” to “distinguishable on the records” in order to create an electronic filing process for business documents that did not require human review. The Secretary of State has defined the “distinguishable on the records” standard as any character, other than a comma, period, apostrophe or single quotation mark, which makes a name different than any other entity name. Upper-case letters are not distinguishable from lower-case letters.

For example, “Joes Great Idea, Inc.” is not distinguishable from “Joe’s Great Idea, Inc.” However, “Joe’s Great Idea, Inc.” is distinguishable from “Joe’s Great Idea, LLC” and “Joe’s Great Idea, Incorporated.”

Using the example above, search for “Joe’s Great Idea” or “Great Idea” to see what other Great Ideas are out there.

Rule 2: Decide if your selected name is “distinguished enough” for you

Although trade names in Colorado are not required to be distinguishable on the record, you may want to search the Secretary of State’s database before filing a statement of trade name. Also, keep in mind that since trade names are not required to be distinguishable on the records, filing trade names for “Joe’s Great Idea, Inc.,” “Joe’s Great Idea, Ltd.,” “Joe’s Great Name, LLLP,” and hundreds of other Great Ideas will not stop someone from using one of these names as an entity name, especially if they did not heed Rule 1.

Whose great idea was it to develop such a loose standard? In 2006, the Secretary of State’s Office became the single location for filing statements of trade names. Previously, some trade names were filed with the Department of Revenue, while others were filed with the Secretary of State. Unfortunately, some of the trade names were filed in both locations, and in other cases the same name appeared in both databases but with different owners. Rather than require the agencies to determine the rightful owner, the legislature changed the name rules so that trade names were no longer required to be distinguishable on the records.  If you don’t want to run the risk of being confused with another company, come up with a name that’s completely unique.

Rule 3: Review the name and address before filing a document.

Colorado is a great state, filled with great ideas. And many entities. A standard search of the Secretary of State’s database returns results for all entities (regardless of whether they are in good standing or have been dissolved for twenty years), trade names, reserved names and trademarks. When you search the Secretary of State’s database to file a periodic report or other document, you may receive a number of search results, or only one, depending on how you enter the name. Either way, review the name, address, and registered agent name and address before filing the document. First, you want to make sure you are filing that document for the correct entity. Second, you may realize that the information needs to be updated.

Rule 4: Read “Entity and Trade Name Filing Requirements and Customs in Colorado,” Parts I and II in the November and December 2012 editions of The Colorado Lawyer.

Or at least review the charts. This two-part article provides an in-depth analysis of the naming requirements and customs, as compared to the above rules, which barely scratch the surface. (In the interest of full disclosure, I am a co-author of the article, but Beat Steiner and Eric Lemmon deserve all of the credit.  Please contact me if you’d like to receive a copy.)

Categories: Company Perspectives