The term "Fictitious Business" gets thrown around quite frequently. While some might mistake it for a shady business that is "made up," it actually is a legal term for a form of registration required of businesses in certain situations. So how does one know whether they need to file a fictitious business statement?
The simplest way of explaining how to determine if one needs to file a fictitious business statement is to ask whether they plan on running the business under an assumed name. If so, then they will need to follow state fictitious business statement laws. So, if the name is John Smith and he wants to start a business called "Super Duper Widgets," he is going to need to file a fictitious business statement or DBA ("doing business as") with the county clerk's office. However, if he wants to start a business called John Smith's Widgets, he would not need to file a fictitious business statement, because the business has his name in it already.
Things get a bit more tricky when you do not have your entire name in the business name. For example, what about Smith Widgets, or JS Widgets?
These kinds of variations depend upon the law of the state in which you are operating your business. In California, fictitious business statements are governed by Business and Professions Code Section 17900-17930 which says that in the case of an individual, a name that does not include the surname of the individual or a name that suggests the existence of additional owners requires filing a fictitious business statement. For example, Smith Widgets would not require a fictitious business statement because it contains John Smith's last name. In most states however the last name alone is not enough. As far as JS Widgets goes, a fictitious business statement would be required as the initials of John Smith are not sufficient to convey who he his.
The reason behind having fictitious business names registered is so that it is easy to track down who actually owns a company in the case of a problem. It also allows the business owner to enforce contracts signed under the name of the business.
In order to learn more about fictitious business statements, check out the resources included below.
- When does a variation of my name become a fictitious business name? (FindLaw)
- Choosing a Business Name FAQ (FindLaw)
- Registering the Name of Your Business (FindLaw)
- Busniess Formation (provided by Kaplan & Associates, L.L.P.)
- Business and Commercial Law Overview (provided by Weinstein, Kaplan & Cohen, P.C.)