This is a simple area of the law that is often misunderstood by my business clients. My hope in drafting this blog is to provide some quick clarification.
First, in the state of Florida – and likely in every other state – all entities must conduct business under their legal name. The legal name is its registered name that appears on the articles of incorporation, articles of organization, or other formation document filed with the state. The reason for this is clear; people need to know who they are doing business with, so they can be sure they are contracting with, meeting, and suing the correct party. Yes, suing the wrong party is something that happens more often than you would think.
This requirement creates an issue, because entities often want to do business under a name other than their legal name. This is especially true if the entity is doing business under a recognized brand. The name they want their customers to see on the front of the building is the brand name, and not necessarily the name listed on the articles of organization. Other reasons for entities to do business under a fictitious name include:
- Using different fictitious business names for different lines of business or divisions rather than creating separate subsidiaries.
- Doing business under different names in different regions of the country.
- Non-availability of a qualifying foreign entity's name.
- Branding the entity’s business with a name that is more descriptive of the products or services that it offers.
- Branding as part of a recognized franchise brand.
- Marketing a name that associates the entity with something popular or well-known in the community, or a name that is easier to remember.
- Branding to match a domain name used by the business.
This is where fictitious names come in. If properly registered, an entity may do business under a fictitious name (aka doing-business-as or a DBA, or "assumed" name), instead of its actual name filed with the state. The fictitious name, which is public record for all to find, then acts as a road sign, pointing individuals from your business brand or marketing name to the actual correct name of your business. As mentioned above, this can be very useful; however, in order to use a fictitious name it must be registered correctly with the state.
What are the consequences?
Doing business under a fictitious name while failing to register your fictitious name with the state is a noncriminal violation of state law, punishable by a fine up to $500. Not properly filing your fictitious name also carries other negative consequences. It can, affect the ability of your entity to sue or defend a lawsuit; result in a court awarding an aggrieved party with reasonable attorney fees and court costs; and prevent the entity from opening a bank account or depositing checks in the fictitious name. Short story, don’t use a fictitious name without registering.
In closing this blog, I want to leave a few final tips. First, fictitious names are only valid for five years, and must be renewed before they expire on December 31 of the fifth year. A fictitious name is not a stand-alone entity. You should not contract, sue, own property, or perform other legal acts under the fictitious name. You must first form the entity and then file the fictitious name. All information provided in a fictitious name application will become public record. You have to have permissions or licenses to use some fictitious names. And lastly, a fictitious name does not provide exclusive use rights in Florida. If an entity wants to ensure it has exclusive use of a fictitious name in Florida, it should consider applying for trademark rights.
Registering a fictitious name with the state of Florida is not very expensive compared with other legal matters, and it is worth doing in order to fully protect your entity. Although this blog is not a complete summary of all fictitious name laws, regulations, and issues, I hope it has been helpful. Contact my firm and we can help you file your fictitious name.