There are dozens of decisions to make when you start a business, but one of the most important ones is your business name. Some might even say that it’s harder than naming a baby. After all, the government doesn’t give “rules” about what you can name your children. They do give rules for business names.
Thanks to those legal regulations, trade names are one type of business name that can get a bit confusing. So if you’re wondering what a trade name is, if you need one, or how you can get one, you’re in the right place. In this guide, we’ll cover all the essentials to Alabama trade names so you don’t have to sort through the legal jargon and focus on what really counts: your business.
Important Tip
What is an Alabama Trade Name?
A trade name—often called a DBA or fictitious name or assumed name—is a type of business name. More specifically, it’s a fake name used by a business, much like you might use a nickname around family and friends.
A bit more technically, a trade name differs from the business’s legal name. Here’s where it becomes important to note what kind of entity you’re running.
For example, let’s say Lauren Smith operates as a sole proprietorship. From a legal standpoint, her business is indistinct from her own person. So her business’s legal name is, well…Lauren Smith. Not many people want to call their business by their own name.
Lauren sells handmade baby clothes, so she decides to name her shop “Sew Sweet Creations.” Unless she incorporates as an LLC or corporation, she’d be using a trade name. Because of this scenario, trade names are most commonly used by unincorporated entities.
That said, many corporations and LLCs also choose to use trade names. For example, a local restaurant, “Becky’s Bistro,” might want to expand across their county, with a slightly different name for each location. Instead of creating a new LLC for the new locations, Becky might get a trade name for it. Corporations might do something similar for new product lines, too.
But that’s trade names in a nutshell!
Is trade name registration required in Alabama?
Alabama, unlike many states, actually doesn’t require trade name registration. You can simply begin operating under a trade name if you choose to (provided it’s not infringing on the name of a registered business—more on this later).
That said, there is an advantage to registering a trade name: registering it gives you exclusive rights to that name. This isn’t super common; in many states, trade names—whether you register them or not—can be used by multiple businesses. But by registering, you stake your claim to your name in Alabama. Anyone else using the name would have to stop using it after you’ve registered. On the flipside, if you and another business used the same trade name and your competitor registered the name, you’d be up a creek without a name.
Because of that, we recommend registering your trade name.
Benefits to Registering an Alabama Trade Name
There are several benefits to registering a trade name. Like we’ve just mentioned, one of the biggest benefits is that you’ll have exclusive rights to that trade name. Once you’ve registered, no one else in Alabama can use it. This doesn’t apply to businesses in other states, of course, but while you’re just starting out, there’s a lot of peace of mind knowing that no one else in Alabama has a name like yours.
One benefit you might not think of right away is that a trade name allows you to get a business bank account in that name. This isn’t a necessity for many entrepreneurs, but from an accounting standpoint, it’s really helpful. You can keep all your “business funds” in one place, separate from your personal funds. That’s a good habit to start from the get-go (especially if you ever intend to become an incorporated entity later).
On a similar note, a trade name gives your customers peace of mind. It’s not uncommon for customers to write checks, right? Without a trade name, they’d write the check to you personally. Some people are leery about that. But thanks to a business bank account, Lauren can tell her customers to make their checks out to “Sew Sweet Creations.” It’s just a psychological thing, but a trade name gives your business an extra layer of legitimacy.
Register your Alabama Trade Name in 3 Steps
1. Check that your trade name doesn’t infringe on any legally protected names.
Before you register a trade name, you have to do your homework to ensure that you actually have clearance to use that name. Here are a few of the names you cannot use:
- Names that are already in use as the legal names of any corporations, LLCs, and other protected entities in Alabama
- Names that have already been registered as trade names in Alabama
- Names that are protected by U.S. trademark law
The Alabama Secretary of State will automatically reject your trade name if it infringes on other names registered in the state. They won’t check the U.S. Patent and Trademark Office’s database for you. That’s why it’s important to complete a few different searches.
First, you’ll need to run a Business Entity Search. This is your way to check the state database for any exact matches to your trade name. As a general rule, if you search your desired trade name and the tool pulls up any matches, you’ll need to change your name.
Resource: Need help with the Business Entity Search? Check out our full name search guide here.
Next, we recommend searching the U.S. Patent and Trademark Office’s trademark database. Even though trademarks are usually regarded as visuals or logos, any names and text included within those visuals are nationally protected. That means no other names or visuals in the entire United States can’t be the same or similar as a trademarked name.
There are plenty of examples of different small businesses being taken to court for infringing on the name of large international chains, but we won’t get into them. Just rest assured that you’ll be doing yourself a big favor by ensuring that your name is completely unique.
Another optional search is just your tried-and-true Google search. This won’t give you any systematic, organized results like what you’d get from the Business Entity Search. But it will give you insight into names being used everywhere.
For example, you might find that your desired name is being used by another business in a neighboring state. That’s fine as long as the name isn’t trademarked and you intend to run business exclusively in Alabama. But if you have any aspirations of expanding into other states, you’ll want to know what names are in use there.
2. File the appropriate trade name application.
In Alabama, the actual process of registering your trade name is pretty simple. First, you have to use the trade name in business. It might seem counterintuitive to use the name before registering it, but that’s just how Alabama does it. More specifically, you’ll need to have “specimens” of the trade name in use. For example, you might include letterhead, business cards, or a piece of business mail.
You’ll need to include those specimens with your Application to Register/Renew Trademark, Service Mark, or Trade Name in Alabama form. This is the document you’ll file to officially register your trade name. There’s a $30 fee to file it, but once you’ve completed that, your trade name is exclusively yours.
3. Renew your trade name.
In some states, a trade name lasts forever. But in Alabama, your trade name registration lasts for five years. Before the five-year period expires, you’ll need to file a renewal using the same form listed above. Like the initial application, the renewal has a $30 fee.
If you don’t renew in time, you won’t face any late fees or anything, but there are consequences. An expired registration makes your trade name available again, putting it up for grabs. You’d lose your exclusive rights, and someone else could register the name out from under you! Thankfully, the renewal process is pretty simple.
Other Considerations for Your Trade Name
Now that you’re a proud owner of an Alabama registered trade name, there are a couple things to keep in mind.
Most importantly, you should note that a trade name does not give you any personal asset protection. That’s a perk that comes with incorporating your business, such as forming an LLC or corporation.
If you already are (or you’re thinking about forming) an LLC or a corporation, then you get personal asset protection and even privacy through a registered agent service. This means that if something ever goes wrong with your business, your personal belongings—your car, your house, your personal savings account—are protected. Creditors or legal plaintiffs cannot touch them.
That protection is not available to unincorporated entities like partnerships or sole proprietorships. Moreover, applying for a trade name does not grant you that protection. In these cases, if something went wrong with your business, you’d have to pay any debts out of personal funds. So please don’t rely on a trade name for those protections.
Next, keep in mind that registering a trade name doesn’t prevent businesses in other states from using that name. The same applies for business’s legal names, too. We won’t get too technical with this, but each state governs its own businesses with no effect on businesses in other states. So as a businessperson in Alabama, you’ll follow Alabama law and federal (national) law for businesses. Mississippi, for example, has no jurisdiction over your business unless you choose to expand into Mississippi. This affects business names, too.
If you want to protect your trade name or legal name outside of Alabama, you do have options. Foremost among them is applying for a trademark with USPTO. If that’s something you’re interested in, we recommend seeking additional legal counsel. Trademarks are a very complicated (and expensive) process, and a lawyer will help you conquer every aspect of the application.
Conclusion
Important Tip
Trade Names might sound a bit complicated, but they don’t have to be. As long as you follow the proper state guidelines, it’s actually as simple as filling out the form and paying the filing fee. Hopefully this guide has taken away some of the guesswork to Alabama Trade Names.
If you decide that forming an actual entity is right for you, we recommend forming an Alabama LLC for most small businesses and entrepreneurs. You can either register it yourself or hire an AL LLC filing service.