Trade Name vs. Business Name: What's the Difference?

When you start a business, you spend a lot of time choosing the perfect name—but the name you choose may not end up being the name your business is known by. This is the difference between a trade name vs. a business name. Your trade name is generally the name you display on your storefront, advertising, and customer-facing materials. Your legal business name is the name registered with your Secretary of State that you use for tax and legal purposes.
 
Although you can use your legal business name on signs and in advertisements, you can choose to use other variations of the legal business name or a different name. If your business structure requires you to have “Inc.” or “LLC” at the end of your name, you may find that you drop those letters when you advertise or talk about your business. Or you can choose a different name entirely. But to protect yourself and your business name, and meet legal requirements, you will need to do some additional paperwork to cover all the variations and names you use.

What is a legal business name?

Your legal business name is the name that you use on the paperwork you file to create your business with your Secretary of State (or similar office). If you formed a corporation, it’s the name on the papers you file with your state, specifically the articles of incorporation. If your business structure is a limited liability company (LLC) or limited liability partnership (LLP), it’s the name on the LLC or LLP formation papers you file with the state. By filing those papers, you officially designate your business’s legal name. This is also the name that appears on your tax ID or employee ID paperwork and is the name used on your tax returns.

The legal name is the formal, official name of your business that identifies it with the government. If you have a corporation, your name probably contains the abbreviation “Inc.,” such as Cute Boots Inc. If your business is an LLC, your name likely concludes with “LLC,” like Valley Woodwork LLC. However, if you do not want to include “Inc.” or “LLC” on your store sign or advertising materials, then you must register a trade name that does not include these designations. This is usually the biggest difference in the discussion of trade name vs. business name.

What is a trade name?

A trade name, also called a DBA (doing business as) name or fictitious name, is the name you use when you conduct business. Walmart is a good example of a trade name. Walmart's trade name is just Walmart—that's the name it uses on its advertising and website, and what most people refer to it as. However, its legal name, which appears on all of its business paperwork (corporation filings, taxes, compliance, etc.) is Wal-Mart Inc.

A trade name is often the same as the legal name, with “Inc.” or “LLC” dropped. So if your business is registered as Tasha’s Dog Grooming LLC, the name your customers know is likely just Tasha’s Dog Grooming.

However, a company’s trade name can be something entirely different from its legal name. As the business owner, you might have registered your business as Jameel’s Book Store LLC, but decide to just refer to your business as Best Books because it’s more memorable or simply shorter. Small businesses might even change their trade name multiple times as they grow.

Some companies form one parent company, but operate various brands under separate names. Gap Inc., for example, is the legal business name of the corporation, but the company also does business under trade names such as Old Navy, Athleta, and Banana Republic even though all of those brands are just part of the Gap Inc. company. The bottom line is that you are not required to have a trade name, but you might find that having one comes in handy.

Registration requirements

One thing that isn’t so different when considering a trade name vs. business name is that they both require registration. If you are forming a corporation or LLC, you are required to register your company’s legal business name with your state. Registration of the name is simply part of your official corporation or LLC business formation paperwork such as articles of incorporation or organization. Whatever name you use in those filings is your legal business name.

Note that in most states, you can’t register the same name as an existing business. Before you file your formation paperwork, do a name search with the state to determine whether the name you want to use is available. You may be able to place a hold on a name (with a fee) until you are able to get your papers filed, but that is not a formal trade name registration.

You are not required to have a trade name; you can simply do business under your legal business name. But if you choose to use a trade name, you will need to register it with your state or county. To protect consumers (so they can determine who actually owns a business they interact with), you must register the trade name with the appropriate state or county office. This may require you to file a trade name registration form or fictitious name statement (sometimes just called a DBA filing) by filling out a simple form, paying a fee, and depending on the legal requirements in your state, it may require placing a legal notice in a newspaper.

Benefits of trade names

Having a trade name allows you to legally conduct business under multiple names, including the name your customers might end up calling your business anyhow because they are likely to drop the “LLC” or “Inc.” designation. It comes with some benefits:

• Brand flexibility. By registering a trade name, you can use that name freely in your advertising without concerns that you are misidentifying your business.
• Business expansion. Using different trade names enables you to enter new markets or launch various product lines without forming new legal entities.
• Privacy protection. A trade name can help keep your legal business name private if you want an extra layer of confidentiality.
• Streamline banking. A trade name registration also means you can have one bank account for multiple business names. So, whether a client writes a check to Meema’s Auto Repair Inc. or just to Meema's Auto Repair, you can cash the check because the bank has your registration papers for both names.

Drawbacks of trade names

The biggest drawback of a trade name is that, in most states, it doesn’t provide legal protection. Registering a trade name does not give you the exclusive right to use that name. If your business’s legal name is Sandy’s Ice Cream LLC but your trade name is Yummy Ice Cream, any other business could also use that trade name. There are a few other disadvantages you should know about.

• Increased paperwork and costs. Your state might require a trade name renewal every few years or require you to register the name in every single county in which you plan to do business. That means filing a form and paying a fee in each county, which can add up.
• Limited uniqueness. Typically, a trade name must be distinguishable from other business names. However, some jurisdictions allow fictitious names, which do not have to be distinguishable. In this case, the name you choose may not be unique, which could confuse customers. 

Protecting your business name with a trademark

In some states, you can’t have the same trade name as another business: The first business to register a DBA gets the right to it. You might have been calling yourself Yummy Ice Cream for a year before you register it, but if Tia’s Ice Cream LLC has registered Yummy Ice Cream already, you won't be able to register this name if your state requires trade names to be unique from other registered names.

One way to be certain that you can have exclusive rights to a trade name is to register it as a trademark, which is a more involved process you can complete through your state’s trademark office or at the federal trademark office. LegalZoom's trademark registration service can simplify this process.

Still have questions about trade names vs. business names? LegalZoom can help. We offer services like registering your business, filing a DBA, trade name renewal, applying for a trademark, and more. Learn more about our business services and how we can streamline the process, so you can keep your focus on building your business.

FAQs

Why would a business use a trade name?

A trade name can make the business more memorable and marketable. It's often used for branding and marketing purposes.

Do trade names provide legal protection for the business name?

Depending on the laws in your jurisdiction, trade name registrations might provide legal protection for exclusive rights to the business name. If your jurisdiction does not give the registrant of a trade name exclusive rights to the name, then you can register the name as a trademark for legal protection. 

Can a business have more than one trade name?

Yes, a business can operate under multiple trade names. Each name can target different markets or product lines.

What’s the difference between a trade name and a trademark?

A trade name is the name under which a business operates, while a trademark identifies and distinguishes the source of goods or services which builds brand recognition and customer loyalty.

Brette Sember, J.D. contributed to this article.