Making Your Startup Business Legal

In Chapter 4, on starting your business, we discussed a bit about creating a DBA and getting your name filed. We will expand a bit in this section on what to do if the name you want is taken, how to check to be sure you are following all the rules, and where to go for help.

1. Naming

Hopefully by now you have selected a business name. The only requirement for a sole proprietorship is that the name not be taken in your county. However, if you have the exact name as another business in another part of the country, you could still run into legal trouble; particularly if you start to expand into other parts of the nation.

So how do you figure out which names are legally taken and which names are legally open? Turn again to the Internet for the start of your search, but also realize that if you are ever going to go national, you will likely have to pay for a name and trademark search, as the amount of hours it takes to search the coun­try is astronomical. There are services that will take care of this for you, for a fee.

To search within your county, simply look up your county online. Once you have your county’s official website pulled up, type into the search bar “business name” to quickly find the section of their site that allows for the searching of current DBAs that have been issued.

Another method you could use is, using your preferred search engine, search for “<name of county> AND <the business name you want>” and/or “<name of county> AND ‘doing business as’,” which should bring up, within the top search results, the page associated with your county’s listing of current and past DBAs. If you want to see if the company is listed nationally, you can do a general Google search with the name in quotation marks.

Ok, so you want to go national, or the possibility is there for you to go national (or international?) in the future. You will need to search the entire United States to see if anyone already has the name you have in mind. As I stated earlier, it is a daunting and near impossible task for you to undertake on your own. This is where business name/identity search and verification services come in. A quick Google search just revealed 72 million results for “business name search.” That’s right—72 million! Searching for “business name search service” comes back with 68 million results.

A website I mentioned earlier, LegalZoom.com, is one of the best known sites that I can recommend. It provides both a nationwide search as well as the regis­tration of your chosen name, should it be available. They will also offer recom­mendations of similar business names that are available for registration if your original choice is already taken.

If the name you want is taken, try to think of a modification that would still suit the business but not break copyright laws. For instance, changing from Inc. to Corp. may be sufficient. Note, however, that some jurisdictions, such as the State of California, do not count words like “A,” “The,” “Corp.,” “Incorporated,” etc., as part of the business name, so the addition or removal of these will not change the result if the name you had your heart set on is already taken. Due to many governing bodies following this same method, some entrepreneurs choose to add words to the name to really distinguish it from others.

2. Copyrights

Before you sell anything, apply a graphic to your website, add a company motto—you name it—you need to be sure that someone else doesn’t own it!

If they do, you could be liable for any damages done to that company and its reputation or business, and you will have to handle numerous attorneys’ fees and the costs of changing your business name—not to mention the detriment to your own business when you have to make changes down the line. Protect your name completely. How do you do that?

According to LegalZoom.com, “Copyright does not protect names, titles, slogans, or short phrases. In some cases, these things may be protected as trade­marks.” Under these circumstances, a trademark is what you (and your business) will need. LegalZoom.com continues, “However, copyright protection may be appropriate for logo art work that contains sufficient authorship. In some cir­cumstances, an artistic logo may also be protected as a trademark.” (LegalZoom, 2008)

3. Business Structure

You already know the official structure—corporation, sole proprietorship, part­nership, and so on. But what about the business model? Will you be an online or on-the-ground company? Will you be a hybrid? Will you have a store along Main Street, U.S.A., but also sell on eBay or Craigslist?

What about your management model? Will you have all people reporting to you? Will you hire managers as time goes on, or in the beginning? Will you hire professionals for advertising and marketing, or anything you aren’t particularly good at, or will you do it all yourself? Will you have a matrix style management style? A top-down management style? Let’s review these two, to get you started.

Matrix management style: The matrix management style is where an indi­vidual (the employee) has two supervisors or bosses to report to, one being a functional boss and the other being an operational boss. This can sometimes lead to staff confusion, as employees aren’t sure who to report to or have a dif­ferent boss for different projects. This management style works best with those who can operate well under ambiguous rules but not so well for people who like structure.

Top-down management style: The easiest explanation of the top-down man­agement system that I have found to date was written by Jyothi M. John in his article “Top-Down Management Versus Bottom-Up Management.” In it, he simply defines the top-down management style as “a management structure in which the managers are appointed directly, with or without relevant experience but with the necessary qualification.” In top-down management styles, direction and strategy is pushed from the highest level of the organization down to the lowest. In bottom-up organizations, management tries to get input from all levels of the organization before making any decisions. You will find most companies to be top-down. As an entrepreneur, particularly in a new business, you probably won’t want your employees deciding where your company goes! You may, how­ever, want their input before implementing a new system.

4. Fictitious Business Name Statements

In Chapter 9, we talked about how to get and file an FBN. What do you do, though, if your name isn’t taken locally but you want to expand nationally? Your FBN does not protect you. So how do you protect your name nationwide? It varies greatly by many things, including who had the name first, who can show it is essential to their business, who is willing to relinquish rights and name, if it’s available for sale, who has imminent domain over a name, and if a person has expanded a business. It also varies greatly by the jurisdiction, court, county, and so on.

5. State-by-State Issues

The big issue when expanding from one state to another is going to be your busi­ness name. What if you are moving from one state to another, and come to find out that someone in the city you just purchased a home in already has an estab­lished business and is using the same business name that you are currently using? Who gets the right of use for that name, once you move into town? Which one of you gets to continue business under the same identity that you have been pre­viously? All good questions, although the answer may not be to your liking (or in your favor).

Let me preface this section by letting you know that there are actually a couple of ways this could go. I will briefly discuss each one.

If you are moving to a new state and there is already an established business under the same name that your current business has, the general rule is whoever had the name first gets to continue using it. You could, of course, get around this by buying the other guy out (if the business type was the same) and acquiring his business. You could take him to court and see what a judge has to say on the matter, although the judge will usually find in favor of the owner with the longest use of the name, which is usually considered to be imminent domain over the name itself.

There are other aspects that are taken into consideration as well, such as com­pany size, customer base, notability, and “recognizability,” etc. An example of the premise of these issues would be if you owned a fast-food restaurant named McDonald’s that has been in your family for 100 years, you would most likely still not win if you went up against McDonald’s. They are more widely recog­nized, have a larger demographic, etc. The overall thought behind using these criteria is that the business that would suffer the most from losing its name gets to keep the name. If both businesses make out to suffer an equally negative impact, it will likely come down to tenure.

On a positive note, if you are moving, you could always change your business name, or the spelling of your business name. This would allow for both you and “Business B” to coexist without any of the aforementioned hassles. If you are not moving to another area, and are expanding your business, you will likely fall into one of the scenarios I just detailed.

6. Where to Go for Help

If you get stuck with all of these difficult decisions, you need to go to specific attorneys for help. There are patent and trademark attorneys that the SBA can refer you to, or you can ask others for counsel on who they use. You can also do a search online, but you run the risk of getting the attorney paying the most for advertising, and not necessarily the one that does the best job.

Source: Babb Danielle (2009), The Accidental Startup: How to Realize Your True Potential by Becoming Your Own Boss. Alpha.

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