Depending upon your business and your company’s marketing strategies, you may at some time consider operating under a new or second name. In such cases, you should consider using a registered trade name for your business. Since businesses evolve and sometimes move into multiple, distinct lines of business, a trade name can sometimes allow you to market a new line of business without changing the name of the entity or forming a second entity.
Trade name registrations provide no limited liability protection and, if the potential liability of the new business is a concern, then you would want to consider using an entity that does provide limited liability, such as a corporation or a limited liability company (an “LLC”). But, if the owner of the trade name is to be an already established entity with limited liability or if the potential liability is extremely low, then using a trade name may be a low-cost alternative to forming a new entity just to get a second name.
A situation where a trade name could be useful is where you are just starting a business with minimal potential liability and you wish to keep the initial investment small. You would, of course, want to consult your attorney to decide whether the lack of limited liability or mixing two businesses would be a concern.
For instance, if Toby’s Windows, LLC wishes to also begin doing auto detailing, rather than forming Toby’s Auto Detailing, LLC, the existing LLC could instead file for the trade name “Toby’s Auto Detailing” and continue using the existing LLC as the sole entity. This avoids having to keep new books and records, avoids additional tax considerations, and avoids paying an additional $300 per year for annual registration. Of course, using a trade name and operating two businesses under the same entity would put both businesses’ assets at risk if one was sued, but if you are comfortable both the existing and new business will have few potential liabilities issues, then this could simplify your business matters.
Maryland actually requires the registration of any name you intend to use to conduct business in the state if something other than your name or the name of your entity:
Any person engaged in any mercantile, trading, or manufacturing business as an agent or doing business or trading under any designation, title, or a name other than the person’s own name, prior to commencing operation of the business, shall file with the Department of Assessments and Taxation a certificate:…
Md. Code Corporations and Associations §1-406(a).
When the entity uses a second name it may refer to itself as “Toby’s Windows, LLC d/b/a Toby’s Auto Detailing” for formal purposes, such as on its contracts or checking account. But using the trade name alone usually sufficient, thereby making it a viable way to market your company under this other name. In other words, the awkward d/b/a (Doing Business As) designation is not required.
An additional benefit to registering a trade name is that, while there is no official trademark benefit of such registration, the fact the name was registered can be evidence you began using it a certain time for purposes of a “common law trademark”. Of course, if you have any concern regarding getting trademark protection for the name, i.e. preventing others from using the name or later claiming you should not be able to use it., then I would likely advise you to have the name and/or logo also registered for trademark protection with the U.S. Patent and Trademark Office or the Maryland Secretary of State, rather than relying upon the trade name filing. For clarification, trademark registration is a completely different process from trade name registration.
In summary, while a trade name will not provide you with any additional limited liability protection, it can be a useful tool for minimizing the complexity of your business structure and minimize expenses, despite being registered with the state. Also, you will not be able to use the words LLC or Inc. after the company’s name. On the other hand, in certain situations using a trade name can be a very good option because of both the simplicity in forming it and the potential cost savings.
For additional information or to discuss establishing a trade name for your business, contact Jeff Rogyom at (410) 929-4578. Please review the Disclaimer page regarding use of this website and its information.