As a small business owner, you have a choice to either work under a brand name or a legal business name. The two can be confusing to understand at first, but to ensure you stay competitive and compliant we’ve explained for you what these two are and what might be a better fit for you.
What is a legal name?
A legal name is the official name of your company, also known as your business name. This name fulfils the legal requirements for your type of business structure, and is used on government forms and applications. For instance, if you choose a sole proprietorship, the legal name for your business has to be your full name. You’re allowed to add words that describe your business – for instance ‘Sara Parker Dry Cleaning’, where the name is Sara Parker. The point is, with a sole proprietorship you need to have your name. Or with an LLC – your name needs to contain the words limited liability company, or an abbreviation of this, and in a partnership the legal name has to have the last names of the owners.
What is a brand name?
Sometimes businesses don’t want to run under their legal names. This can be for various reasons, like your legal name preventing you from attracting customers because it’s not catchy enough, or you don’t want your brand name to have your name in it too. A brand name is different from a business’ legal name; it can be used for advertising and sale purposes. It’s the name that is seen publicly, like on signs or online. Brand names are sometimes described as being nicknames for a company.
For instance, Disney Consumer Products and Interactive Media is branded under the name ‘The Disney Store’. This is pithier and so easier to remember, bringing back previous customers. A trade name does not need to include LLC, Corp, or other legal endings that your legal name requires. Brand names can also be referred to as trade names or DBA (doing business as) names.
Why should you use a brand name over a legal name?
There are many, many reasons why you might want to choose a brand name over a legal name.
Corporations often use trade names in order to differentiate their brands, like when they’re making a variety of products, all for different demographics. A very famous example of this is Gap Inc. brands. Gap Inc. is their legal name, but various brand names they’ve used that you’re probably familiar with are Banana Republic, Old Navy and Athleta.
Getting a brand name is also a great idea if you want to operate under another name. Your legal name might not be as flattering towards what you’re trying to sell, and a different name could be a huge success. It can help with advertising, sales, and attracting more customers, especially if you’re a sole proprietor, wanting to operate under a name other than your full name.
You also might want to change your name if a new partner joins, or you add a new line of products, and your old legal name doesn’t fit so well anymore.
Often people choose their legal names in a rush, because picking a name isn’t so easy. They then realise what they really want their name to be, so legal names are mainly just for official papers. Brand names are actually what are important for a business, as they are what the public eye sees.
TRUiC has a great brand name generator if you’re thinking of moving from having your legal name to a brand name. Visit their site for more.