Are You Using the Correct Name?

By: Skjold-Barthel

A critical component to effectively maximizing the limited liability protection afforded by your corporate entity is the use of the correct 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, etc. 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 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 thereof, such as “P.C.,” “P.S.C.,” “S.C.,” “P.A.,” etc.

For example, take fictitious A & B Investment Corporation. A & B Investment Corporation is the official corporate name. Mr. Smith owns one hundred percent (100%) of the stock of A & B Investment Corporation and is A & B Investment Corporation’s only director and officer. A & B Investment Corporation is often only 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 only print “A & B Investment” on his business cards, corporate letterhead and marketing materials. However, A & B Investment is not a registered Assumed Name of A & B Investment Corporation. Hence, when Mr. Smith begins to transact business as simply “A & B Investment,” not as “A & B Investment Corporation,” he is transacting business as a sole proprietorship known as “A & B Investment.” Mr. Smith is personally liable for all of the debts of “A & B Investment,” not “A & B Investment Corporation.” Hence, 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 name “A & B Investment.” 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 have registered “A & B Investment” as an Assumed Name of A & B Investment Corporation, thereby utilizing the liability protection he already has in place.

A prudent business owner uses the proper corporate name on all written materials, including business cards, checks, letterhead, marketing materials, etc. If a certain trade name or abbreviation has become synonymous with your business, register the name as an Assumed Name.