A young man recently formed a Delaware corporation on his own. Instead of consulting with a Delaware business attorney before he filed the necessary papers with the State, all he did to make sure he could use the name he wanted was to check the Delaware Division of Corporations website. He happily discovered that the name he wanted to use was available.
He opened a bank account in his corporation’s name, he ordered letterhead, and he ordered business cards. He got a taxpayer identification number from the IRS, and he got his business license from the Delaware Division of Revenue.
A few months later, he got a letter from a lawyer demanding that he cease and desist using the name because the lawyer’s client, who ran a similar business, had been using the same name for many years.
When he contacted me, this young man was in a state of high anxiety. He didn’t know what he had done wrong, and he was scared. He was worried about all the money and time he had spent just getting his business ready to open for business.
The simple and rather common mistake my client made was in limiting his name availability search to the Division of Corporations website. He didn’t realize that the only obligation of the Division of Corporations was to make sure that a new corporation’s name is distinguishable in their records from the names of other companies who were already registered. On this point, names don't have to be very different to be distinguishable on the Division of Corporations records. For example, the name "Transamerica Airlines, Inc.," is considered distinguishable from the name, "Trans-Americas Airlines, Inc."
In my next article on this topic, I’ll address what my client could have done to make sure the name he wanted for his corporation was in fact available.
