Why It’s Important to Use the Full Legal Name of Your Business Entity

Limited Liability Company NameOne advantage of establishing a business as a limited liability company (LLC) is that the owners are typically not held personally liable for the company’s debts or court judgments, assuming that company formalities are maintained. Making sure the LLC owners remain protected is critical, so they must constantly be aware of how the company is presented to the public.

That is why LLC owners and members should always use the complete name of the business – including the “LLC” designation – wherever the company name is displayed. This includes contracts, websites, business cards, and social media accounts, as well as advertising and marketing materials.

Using the “LLC”

Some owners may purposely decide not to use the “LLC” moniker in certain instances. While this is a business decision, LLC owners should be forewarned that it could create unintended consequences.

If it is not clear that a business is an LLC and the company becomes embroiled in a lawsuit, a court may find that the owners entered into a business transaction as individuals, and not on behalf of the LLC. This could result in personal liability for the owners. By including the three letters “LLC” on anything related to the business, the owners can help keep their personal assets, including bank accounts, homes, and vehicles, from being taken by creditors or by a court to satisfy a judgment.

Remember, too, that LLC members frequently sign contracts on behalf of the business. It is imperative that owners sign any contracts in the name of the LLC. For example, if LLC member, Fred Smith, signs a business contract “Fred Smith,” then he is likely to be found personally liable for the debt. But, if he signs the contract “Fred Smith, Member of OurCompany, LLC” then the business is responsible for the debt.

Always using the “LLC” designation has other advantages as well, including:

  • It puts clients and customers on notice that the company is a separate legal entity and that any legal claims will be brought against the business and not the individual owners.
  • It puts potential clients and customers at ease, letting them know the business has been registered with the state and is legitimate.

The “Doing Business As” Option

Some business owners simply may not like the way “LLC” looks when it’s used in the company name, so they purposely decide not to use it on business cards, the company’s website, in advertising, and on social media sites.

If a company decides not to use the“LLC” in certain situations, then it needs to file a Certificate of Assumed Name (also known as a “doing business as” or “DBA”) to better protect the individual owners from legal liability. The DBA is a fictitious business name that is basically an extension of the legal business name (the LLC name). In fact, it can be an entirely different name from the formal company name or as simple as the company’s formal name without the “LLC” designation.

If you have questions about forming a new business or about LLCs in particular, please contact Kate Gadbois at kgadbois@kehb.com or (269) 324-3000.

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