subject: Are You Using the Correct Name? The Importance of the DBA [print this page] Are You Using the Correct Name? The Importance of the DBA
As simple as it sounds, a critical component to effectively maximizing the limited liability protection afforded by your corporate entity is the use of the correct business name.
As businesses age, certain trade names or abbreviations become synonymous with the business sometimes to the point of supplanting the official corporate name on business cards, websites, logos, and other branded materials. However, unless trade names, abbreviations or variants of the corporate name are registered as Assumed Names (commonly referred to as "DBAs") of your corporate entity with the Minnesota Secretary of State, you could be subjecting yourself to the personal liability you were originally attempting to avoid when you incorporated or organized your corporate entity.
In Minnesota, proper names for corporations must include "Corporation," "Incorporated," "Limited," or any abbreviation thereof, such as "Corp.," "Inc.," or "Ltd." Likewise, proper names for limited liability companies must include "Limited Liability Company," or "LLC." Professional firm names must include "Professional Corporation," "Professional Service Corporation," "Service Corporation," "Professional Association," "Chartered," "Limited," "Limited Liability Company," or "Professional Limited Liability Company," or abbreviations such as "P.C.," "P.S.C.," "S.C.," "P.A.," etc.
For example, take fictitious A & B Investment Corporation the official corporate name. Mr. Smith, its only director and officer, owns one hundred percent (100%) of the company stock.
The company is often referred to as A & B Investment by its customers and the community at large. In fact, A & B Investment (by itself, without "Corporation") has become so common that Mr. Smith decides to print "A & B Investment" on his business cards, corporate letterhead and other related materials.
Despite Smith's actions, A & B Investment is not a registered DBA of A & B Investment Corporation. So, when Mr. Smith begins to transact business as "A & B Investment," rather than "A & B Investment Corporation," he is in effect transacting business as a sole proprietorship.
As such, he has inadvertently made himself personally liable for all of the debts of "A & B Investment." In other words, if A & B Investment gets sued, it may not be able to claim that it is really A & B Investment Corporation, thereby subjecting Mr. Smith to full personal liability for any actions undertaken under the abbreviated moniker
However, for a simple $25.00 filing with the Minnesota Secretary of State and the publication of the Assumed Name filing in a legal newspaper for two (2) consecutive weeks, Mr. Smith could easily register "A & B Investment" as an Assumed Name, utilizing the liability protection he already has in place.
A prudent business owner always uses the proper corporate name on all written materials including business cards, checks, letterhead, and marketing materials. And, if a certain trade name or abbreviation has become synonymous with your business or is commonly used, make certain to register the name as a DBA a minimal investment that is well worth the cost.
