Choosing a Corporate Name

Corporations are entities, typically businesses, that have the authority under the law to act as a single entity that is separate and distinct from the shareholders who own it. Only a corporation itself may be held liable for corporate obligations, for example, maintaining required business records.

There are numerous different types of corporations. Generally, corporations are classified based on specific factors, including:

• The corporation’s business purpose;
• The manner in which the corporation’s income is taxed;
• The number of shareholders in the corporation;
• The amount of stock that will be issued by the corporation; and
• Whether or not a corporation is incorporated in order to make a profit.

In most cases, when an individual refers to a corporation, they refer to one of the 2 main types of corporations under tax laws, C Corporations and S Corporations. C corporations are taxed separately from their owners.

S corporations, on the other hand, are not. There are many benefits to forming a corporation, which include:

• The corporation can survive changes in ownership;
• The corporation can exist perpetually;
• A corporation is considered an individual and, therefore, is entitled to certain constitutional protections; and
• There is limited liability because only the corporation itself is held responsible for its obligations.

Why Is a Corporate Name Important?

A corporate name is very important for a corporation due to the fact that it is the name that the public will associate with that particular business. The corporate name will also be the legal name that the company will use for:

• Forms;
• Documents;
• Filing lawsuits;
• Conducting business; and
• Other matters.

Because of this, it is important to choose a corporate name that can easily be associated with the business operations or the products. The name, however, should not confuse the public into thinking that it is associated with a name that already exists.

This is referred to as brand recognition. A corporate name, typically, must end with “Inc.” or “Corp.” A corporate name is also important because it tends to preserve the veil that protects the owners from legal liability to the public.

This applies especially to limited liability companies. If an individual forms a corporation, it becomes a separate legal entity from the individual.

The name of that separate legal entity helps to preserve principles of liability in order to shield the owner.

How Do I Know if a Corporate Name is Available?

When an individual is filing to incorporate their business, a corporate name should not be used if another company is already using it. Typically, it is up to the Secretary of State to determine if a name is available and to respond to the business applicant regarding the availability of a corporate name.

It may be wise, however, to consult with a business lawyer who will check various databases, county records as well as trademark and copyright listings for the availability of names.

Can Anyone Else Use My Corporate Name?

Simply because a business is granted status as a corporation by the state does not mean that their name is exclusively theirs to use. In order to protect a business name, the owner may also have to file under trademark laws in order to secure the name.

A corporate name may also be closely related to a certain logo or image. These can also be protected for exclusive use under trademark laws.

It is important to note that issues such as filing for incorporation and investigating trademark laws are often complex. They typically required the assistance of an attorney.

Having the assistance of an attorney can also help avoid costly errors in the application process that may result in a denial or rejection of the application.

If I Plan to Form a Corporation, What Types Are Available?

There are numerous different types of corporations that are available, depending on the needs of the owner. Common corporation types include, but are not limited to:

• A business corporation: This, also known as a for-profit corporation, is a corporation formed to engage in commercial activity for a profit;
• A C Corporation: This is a corporation whose income is taxed through the corporation rather than through its shareholders. If a corporation does not choose S Corporation tax status, pursuant to the Internal Revenue Code, it is a C Corporation by default;
• A close corporation: This is a corporation whose stock is freely traded and is held by a few shareholders. The shareholders are, in many cases, within the same family. The requirements for close corporations vary by state;
• A controlled corporation: This is a corporation in which the majority of stock is held by one individual or firm;
• A cooperative corporation: This is a corporation primarily organized for the purpose of providing services and profits to its members in contrast to a corporation organized for corporate profit. It is most commonly formed to purchase real property, for example, an apartment building, so that the shareholders may lease the apartments;
• A foreign corporation: This is a corporation that is registered in one state but also authorized to do business in one or more other states. This type of corporation is typically created to take advantage of state incorporation laws or tax breaks. It can also refer to an overseas corporations doing business in the United States;
• A non-profit corporation: This is a corporation organized for a purpose other than making a profit. A non-profit corporation is typically granted special tax treatment;
• A private corporation: This is a corporation that is founded by and composed of private individuals. It is formed principally for a nonpublic purpose, which may include:
  • manufacturing;
  • banking;
  • railroad corporations; and
  • charitable or religious corporations;
• A professional corporation: This is a corporation that provides a service of a type that requires a professional license. These corporations are typically made up of professionals such as:
  • architects;
  • accountants;
  • lawyers;
  • physicians;
  • veterinarians; or
  • various other professions.
• A public corporation: This is a corporation whose shares are traded to and among the general public. These corporations are government-owned. They engage in activities that benefit the general public, while usually remaining financially independent. These corporations are managed by a publicly appointed board; and
• An S Corporation: This is a corporation whose income is taxed through its shareholders. Under the Internal Revenue Code, only corporations with a limited number of shareholders can elect S-corporation tax status.

How Is a Corporation Formed?

Corporations are typically formed by complying with the corporation laws in the state. The majority of states base their corporation laws on a model act.

This act is called the Revised Model Business Corporation Act (RMBCA). Corporations are formed when articles of incorporation are filed with the Secretary of State in the state where the corporation is forming.

There are numerous requirements for corporations in different states. It may be helpful to have the assistance of an attorney when forming a corporation to ensure that all of the requirements of the state are satisfied.

Should I Hire a Lawyer if I Need Help Choosing a Corporate Name?

Choosing the name of a corporation is not simply a matter of preference or taste. Choosing an appropriate name may have significant consequences in terms of business profit as well as legal requirements.

If you wish to form a corporation, it is in your best interests to consult with a corporate lawyer for advice on choosing a corporate name. Your lawyer can assist you with choosing a corporate name that will help maximize the visibility of your company.

In addition, your lawyer will represent you in court if you have to file a lawsuit regarding the corporate name.