Business Tax

Admonishing a Foreign Company for Wrong Imprint

The LG Frankfurt / Main (re 3-12 O 151/02) had to decide on the question whether a company not based in Germany can be admonished for an incomplete imprint on its homepage and whether German law on data protection was applicable.

Having a correct imprint is something not really so difficult – actually. A company based in Frankfurt / Main admonished a competing company located in Cardiff, Wales (UK) because this company provided no information on its VAT-ID and commercial registry number. This Welsh company was offering comparable products as like the plaintiff on the German market. The Welsh company defended itself but in vain.

The judges decided that the Welsh company was correctly admonished because it violated the German Remote Services Act (Telemediengesetz). It is correct that the Welsh company has no German VAT-ID and German commercial registry number. Not having German company ID is nothing to complain about. However, §6 no. 4 TDG is to be understood that comparable information from foreign registries are to be provided. The spirit and purpose of the Remote Services Act is transparency and based thereupon consumer protection. Such goals can only then be effectively pursued if foreign companies disclose their identification on their websites in so far as they render services or trade products in Germany.

Other Relevant Articles

Admonish-Proof Web Shops

Admonishment Trap: Standard Terms and Conditions are Mandatory!

Continuation Clauses in Admonishments

Effective Defense against Admonishment and Damage Claims

Webpage Owner's Characteristics on the Internet

 

Business in Pedestrian Zones

As you have noticed from the previous pages, pedestrian zones are no law-free zones. If you want to make any kind of business, be it “only” to distribute flyers, you might need permission. These questions are answered in the law on streets and ways of the federal states. On top of that, communities might have also set up their own regulations in special by-laws. In other words, what is chique in Berlin might be disgusting in Munich – i.e. not permitted.

Contents: Advertisement, Selling & Trading, Arts , Begging

Is there a general orientation, a rule of thumb, what kind of business activities is permitted in pedestrian zone?

Be it an information booth, advertising board, Bratwurst stand, ice cream van or “just” a traveling hawker, all that is subject to permission for special use (“Sondernutzung”).
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Advertisement

Can’t I put my little sandwich billboard just in front of my store on the street? It won’t really disturb anybody.

I regret not. OLG Karlsruhe (judgment of April 15, 1976, re 3 Ss (B) 231/75) rules that a triangle-like stand disturbs the communication interaction among other persons and is no public use anymore.
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You say that the pedestrian zone is for communication. So may I not set up an information stand?

Sure you may do so but best would be when you have the correct permission. OLG Hamm (judgment September 26, 1978, re 2 Ss OWi 1157/78) considered this as special use subject to permission.
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We applied for an information stand to promote that American voters should register for the next presidential election. Our city’s administration denied because their by-laws forbid any and all political activities downtown. How meaningless… Can this be?

Well, yes and no. OVG Lüneburg judged (March 11, 1985, re 12 C 1/84) that a total ban of promotional activities in city centers in their by-laws contradicts the purpose of pedestrian areas: interaction and communication among persons. However, just because a total ban of political activities may not be, you cannot create a reverse conclusion that you are now entitled to have such stand downtown. If you do not block traffic and / or communication among other persons and no other reasons for denial exist, you ought to get the permission.
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What about distributing flyers or similar brochures?

There is no clear general rule in Germany. In Berlin you need a permission pursuant to §8 Street Cleaning Act) unless it is a political, social, religious activity. The Federal Constitution Court decided that distributing flyers in Hamburg can be done without special permission. The background to this decision was Hamburg’s bylaws had determined that any and all activities in pedestrian zones were subject to permission. The BVerfG (judgment October 18, 1991, re 1 BvR 1377/91) scrapped this rule in the bylaws because the scope of the regulation was too wide. Besides, the court could not determine how distributing fliers can affect or endanger the security in traffic.
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Selling and Trading

Summer time with its warm temperatures is the main business time for me. Do I need any permission to put extra tables and chairs outside my restaurant on the sidewalk?

OVG Lüneburg judged (September 3, 2003, re ME 193/03) furniture or planters or showcases do not really have anything to do with pedestrian zones but are very common and are therefore to be tolerated.
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I have a shop downtown and would like to put out boxes with goods out on the sidewalk in front of my store. Do I need permission?

The Administrative Court Stuttgart (September 15, 2009, re 13 K 1166/09) decided that retail shops can place their goods in front of their shop on the sidewalk or pedestrian zone, if the box is not higher than 1.5 m and reaches no more than 1 m into the zone. Pedestrians are to have enough space to stroll around it. 
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I got a good idea how to legally carry out a business in a pedestrian zone. I’ll attach a hot dog cooker to my bike and pull it through these streets. Hah! I will beat the German authorities.

Sorry, to disappoint you but, in 1996 somebody else already had that idea. The VG Braunschweig judgment June 17, 1997, re 6 A 61003/97) denied such permission to a dealer because it is to be assumed that others will want to follow his example and in the end too many of such dealers will be blocking the streets. Such will turn out to be only a “sales street” , not a way for pedestrians anymore.
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Arts on the Street

I’m a street musician. Recently a cop shooed me away because I was doingbusiness” on the street. All I was doing was leaving my instrument case open on the street and playing my sax. That’s not business. I was not on a stage performing.

A pedestrian zone is actually a place for strolling around and not a stage for a performance. Such is the case when musicians set up their instrument box to collect coins or even sell CDs. This is an artist’s profession, to be paid for playing or for his canned music. Pedestrians have to stop or walk around such performances. However, playing music on the street cannot be totally forbidden as long as the constitutional guarantee for the freedom of art exists (art.5 III GG)>
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Thanks for the answer! It was so informative a supreme court judge would be proud of it. Could you please explain it for me – a non-lawyer?

The BVerwG (on November 9, 1989, re 7 C 81/88) decided that a lady spontaneously cutting silhouettes was to be granted a special permission to perform this art in a pedestrian zone. Her activities were covered by the constitutional freedom of the art (art. 5 GG). Her cuttings expressed her artistic activities based on fantasy, intuition and artistic knowledge. Besides, this lady needs to find her models in the zone to perform her art. Nevertheless, the business character of her activities prevail and not only human interaction. She is entitled to be granted a special permission for cutting silhouettes.
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Begging

When business is to be permitted in the German “piazza”, can’t beggars be forbidden to stretch out their filthy hands?

While artists perform an activity and request a payment, beggars do not give an equivalent. They allege an “emergency” that you might donate for their need. I understand that you feel pestered but that does not mean that begging is forbidden. In contrary actually, at least “silent” begging is permitted. Just silently stretching out a hand or a cup does not infringe a law. So you will have to cope with that. What you do not have to accept is when you are physically badgered to give money. In such case, the police may remove such person (VGH Mannheim, judgment July 6, 1998, re: 1 S 2630-97) on the grounds of disturbing public order and safety.
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Choosing a Business Name

What issues should I keep in mind when picking a name for my business?

No doubt you will spend hours brainstorming for a business name that represents your products or services – a name that is both marketable and infused with personality. To help the creative process along, you might surf the Web, browse the dictionary, read trade magazines, and bounce ideas off of friends and colleagues. But as you hunt for the perfect name, keep three main questions in mind:

  • Will your business name receive trademark protection?
  • Is your proposed business name available?
  • If your business will have a website, is a similar domain name available?
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What is the best type of name for my business?

There is no one-size-fits-all formula for picking a great business name. The best name depends on a host of considerations – some as obvious as the kind of business you do, others as unique as your own tastes and style. There are, however, a few guidelines that will steer you in the right direction. A good business name should:

  • be distinctive, be memorable, be easily spelled, and be easily pronounced,
  • suggest the products or services you offer,
    and
  • distinguish your name from your competitors.
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I have decided to open a store to refill ink cartridges for printers. My company’s name is to be “Blotting Inks Inc.” Any objections?

Yes, several. Generally, you can choose any name you wish but only in addition to your personal name. In German, the company’s name is in colloquial German “Firmenname” or “Unternehmensname”; in legalese the wording is “Firma”. (N.B. the German word for "company" is also “Firma”. No need at all to be embarrassed if you do not get it legalistically correct, also lawyers mix it up…) Also it is forbidden to call your company an incorporated company if you are not one.
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What is the "legal name (= Firma)" of my business?

The legal name of a business is the official name of the person or entity that owns a business. If you are the only owner of your business, then its legal name is simply your full name. If your business is a partnership, and you have a written partnership agreement that gives a name to the partnership, then that name is the legal name of the business. Otherwise, the legal name of a partnership consists of the last names of the owners. For corporations, the legal name of the business is the name registered with the company's registry. Your business's legal name will be required on all government forms and applications, and is particularly important to use on your application for a federal employer identification number.
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What is a fictitious business name?

The term "fictitious business name" (or "Sachfirma"in German legalese) is used when a business uses a name that is different from its legal name. For instance, if James MacToole names his sole proprietorship Turtle's Car Repairs, the name "Turtle's Car Repairs" is a fictitious business name because it does not contain Jame's last name, "MacToole." A fictitious business name can be any combination of a phantasy name, your real name, or a description of your name.
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So, what are the rules for finding a company’s name?

You can use your personal last name. You can add a description characterizing your business. This description must be clear, true, and not be mistakable with other companies (§§17, 18 HGB). If you have a corporation, you are required to use either that corporation’s name in full (offene Handelsgesellschaft, Gesellschaft mit beschränkter Haftung i.a.) or its abbreviation (oHG, GbR, etc.). “True” is to tell you here that if you are dealing with firecrackers you may not show that you are dealing with milk. Further rules depend on what kind of business you are running – seen from the structural side.
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What may I use as a company’s name for a sole proprietor (Einzelunternehmer)?

You must use your name, i.e. at least your last name and if you wish also a description of your business. Coming back to your previous wish: “Jack Daniel Blotting Ink” will be fine for a sole proprietor. For the store’s sign it will suffice to have just “Blotting Inks”.
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What are the rules for a Gesellschaft bürgerlichen Rechts or GbR?

If you have a GbR, then you are required to have at least two personal names for the company.
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How may I describe my oHG or offene Handelsgesellschaft?

This open trading partnership is to use at least one of the partner’s last name and may add a description (§19 II HGB).
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Which name is good for a Partnerschaftsgesellschaft or PartG?

You are to use the last name of at least one partner, legal form (Partnerschaftsgesellschaft, Partnergesellschaft, Partnerschaft, or its abbreviation “& Partner”) and you may add a description.
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What is good for a GmbH?

You either use your family name or a fictitious business name plus "Gesellschaft mit beschränkter Haftung" or a commonly understand abbreviation like "GmbH" or "...gesellschaft mbH".
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What’s the idea behind these company’s name? I don’t want to show everybody, who’s the owner. That’s none of their business. Is not it just another way of German bureaucracy?

The law wants business names to give customers a quick way to determine the owner of a company, so they can contact her with a complaint or take legal action against her. But it is not just about complaining customers. If you used a fictitious name for your business but did not register it, you yourself could get the raw end of some deals: You would not be able to enforce any contract you signed under your business name. This requirement is in your own best interest, so do not be tempted to shrug it off. Sorry, for your need of privacy but your wish is illegal. The idea behind this is that everybody can know with whom he or she is making business.
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A friend of mine offering a professional services was ordered by the tax office to also submit a tax return for trade tax. His company’s description told the authority, he was running a trade and not only a professional business. I thought he is subject to that tax also. What went wrong?

It can be that your friend just picked a wrong description for the company. The tax authorities have processed in court hundreds of precedents on what is a professional service and what a trade. IT-consultants, for example, offer without question professional services but if such person puts on his sign “Computer Consultation (= EDV Beratung)” this remains vague. In doubt, the tax office will consider this as a trade with all fiscal consequences.
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Is there anything he can do about it?

Sure! He has to argue with the tax office and prove that he really only has a professional service. N.B such arguing is not illegal even if it means that you are trying to reduce your taxation. It is your right to construct your legal circumstances to avoid higher taxation. Do not even think you might be able to do this yourself. Prior legal advice would have saved not also a lot of money but also much stress.
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How do I find out if the business name I want is available?

You will have to conduct a name and trademark search to make sure no one else is using the name you want to use (or a very similar name) to market similar products or services. Best check following sites / directories:

  1. Unternehmensregister,
  2. Handeslregister or Commercial Registry,
  3. German Trademark Office,
  4. Yellow Pages,
  5. Das Telefonbuch,
  6. Das Örtliche

Some companies also provide paper business directories that are distributed for free among households. It should be sufficient to check your city. If you live in the suburbs also check that major city, too. If you find that your chosen name (or a very similar one) is registered as a trademark, you should not use it. If you are organizing your business as a corporation, you must also make sure your business name is not the same as that of an existing corporation. You can check the company's registry to find out for corporations. For further details to the history, check out the article "Company Information on the Internet Starting 2007 ". Supposing somebody else has already taken your designated name or it is very similar, you will have to choose another.
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How intensively do I have to research?

Good question. Generally, the more the better. Taking it practically, LG2G suggests as a minimum that you check the official registries (1 and 2 – above list) and one or online phone books (no. 4 ff. of above list). N.B. Do not waste your time trying to follow many other online directories. Very often, they are just a spin off from the mother companies (Das Telefonbuch, Das Örtliche, Gelbe Seiten).
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Do I have to register my business name?

Generally, there is no special registry for business names in Germany. The law does not recognize the concept of registering a business name. Corporations have their name "registered" when you file your company's articles of association with the Commercial Registry. Registered tradespersons ("eingetragene Kaufleute") only have to possibility to register themselves or their name. You may also want to take advantage of the extra protection that registering your name as a trademark can give you. While it is not required, registering your name as a trademark at the Patent and Trademark Office in Munich, it can prevent even more other businesses from using a name that is likely to be confused with your business name.
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Can I change my business name to include "GmbH" or "& Partners"?

Some people confuse choosing a business name with choosing a type of ownership structure, such as a corporation. But you cannot just tack "GmbH" or "& Partners" onto the end of your business name and start calling yourself a corporation or so.
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I am hoping to start a website, to bring people to my stores. I just tried to register my business' name as a domain name but found it was taken. When I type in the address, though, the screen says "under construction." It is been "under construction" for months. What should I do?

You have a few options. The easiest and cheapest thing to do is try and wiggle your chosen name a little bit. If you are using .com with the name, could you use .org, .net, .biz or .info? Or, could you vary the name slightly from your exact business name? For instance, if you have a muffin store called "Franny's" you could try frannysmuffins.com, instead of frannys.com. Or, try a whole different name. Maybe use a slogan or a description of your product – something like blueberryfever.com or moistandfluffy.com. There is a chance that you are a victim of "cybersquatting", the bad-faith purchasing of a domain name. The "under construction" screen could show that the purchaser has no intention of using the domain name – only of selling it back to you. In this case, you could sue the registrant in court under the rules of misusing names or use the dispute resolution procedure of the agency in charge of such things – the Internet Corporation for Assigned Names and Numbers (ICANN). The ICANN route is a relatively low-cost and quick process, using arbitration. In either case, you will generally have to show that you have rights in the name, that the registrant does not have rights in the name, and that the name was registered in bad faith. One example of bad faith is that the owner bought the name solely for the purpose of selling it to the legitimate owner.
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Okay, so I found the person holding the domain. Now what? Can I immediately sue him?

Before filing a complaint in court, though, you should look into the situation. There could be an innocent explanation for the "under construction" status. It is easy to register a domain but difficult to get a site up and running. Try contacting the registrant. You can find registration information at www.whois.net. Find out if there is a reasonable explanation for the use of the name and if the registrant would be willing to sell it to you. Be aware that some registrants, especially cybersquatters acting in bad faith, may supply false information about domain name ownership. In these cases, there is not much that can be done to track them down. But there are ways to wrestle a domain name from a bad faith registrant even if the identity or location of the cybersquatter is unknown. If all these efforts were in vain, then latest hire an attorney to fight for your rights.
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Examples of Valid Company’s Names

Examples

Business

Bill Gates

Sole proprietor

David Danneman’s House of Puff

Sole proprietor

Macrohard GmbH

Corporation

Mickey & Minnie Mouse Dairy GbR

GbR or oHG

Schlafgesellschaft mbH

Corporation

Wheeling and Dealing Aktiengesellschaft

Corporation

Goofy & Partner Attorneys

Partnership

Batmann Protection oHG

oHG

Business Legalities

This page is all about the first most general things to consider when contemplating to open a business and become self-employed after being employed. We will be introducing the difference between "trades" and "professionals (= professional service providers = freelancers". Not considering this difference can become costly.

I want to start a business in Germany and while doing so; I want to live here, too. How can that be accomplished?

Since 2005, Germany has an explicit regulation on the working migration of self-employed persons to Germany. The big "wow" about this is that you now have rules and not only discretion. In 2012, the requirements were further reduced. This will not be discussed here as this topic has been introduced to you in the section Entry > Reason of Residence: Business
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What is it like to run a business? I have only been employed so far and was laid off just recently.

Let me take a deeeeeep breath. The Germans have a nice saying to answer your question. It is derived from the word “selbständig” itself. This word means independent, self-employed, autonomous. The Germans like to say “Selbständig sein bedeutet sich selbst und ständig treten.” or Self-employment means to constantly kick oneself and that permanently. In fact, there is nobody else to do it, because you do not have a boss anymore telling you to do this or to do that.
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What do I need to start a business?

You only need three things: Money, more money and even more money. As you know, “Money makes the world go around…” Okay, now honestly: an idea, money, and endurance. Starting from the conceptual perspective, there are two possibilities: you either have an idea or you buy an idea. Latter is called franchise. Coming from the financial side, there are two ways to start: either you have assets or you buy assets – commonly referred to as a loan. Having your own fortune is the easiest way, but I do not think you would be reading this website if you were that rich. Receiving a loan is not the toughest way. Toughest is to obtain a bank loan. No kidding!
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I want to start a business. Will I need any special – foreigner related – permits besides work and residence permit?

No. Needing any special permits depends very much upon the business you will be running. As a foreigner, you will not encounter any special restriction concerning foreigners founding a business. Certain professions require special permissions and so the company to provide these services, but they apply for Germans just as well. Keep reading. In other words, German constitutional law forbids legal rules that say “Indians may not open restaurants.” If that Indian has been sentenced for a couple of years, he will not obtain a permission to open the restaurant due to his imprisonment only.
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Who is providing professional services?

In Germany, you have to keep in mind that every entrepreneur follows a business. Furthermore, German law distinguishes between “normal businesses”, so called “Gewerbe”, and professionals so called “freie Berufe”. The general differentiation between a normal business and professional services can roughly be compared to the difference of a “blue collar” and “white collar” job. The law in §18 I 2 EStG describes professional services as such:

Professionals are the self-employed activities of:

  • scientific, artistic, literary, instructing or educational activity, the independent occupation, engineers,
  • physicians, dentists, veterinarians, lawyers, notaries, patent attorneys, surveyors, sworn auditors,
  • architects, trade chemists, accountants, tax consultants (Steuerberater), consulting economists and management experts, sworn-in auditors (vereidigte Buchprüfer),
  • physiotherapists, journalists,
  • picture reporters, interpreters, translators, pilots,
  • and "similar professions".
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Some wording hints: "I render professional services." translates "Ich bin ein Freiberufler. [for men]" "Ich bin eine Freiberuflerin." [for women] or "Ich übe einen freien Beruf aus."

"I'm a tradesman." translates "Ich bin ein Gewerbetreibender. [for men]" "Ich bin eine Gewerbetreibende. [for women]" or "Ich übe ein Gewerbe aus."

Be aware, not everybody determines so strictly. The main relevance for the difference is in taxation.

 

To qualify as a professional do I have to do all the work all by myself? May I not hire personnel?

Having professionally trained personnel does hinder the qualification of as self-employed activity as long as it is preformed with expert knowledge and at own responsibly. In other words, an artist may hire a secretary to take care of his fan mailings. This artist, however, will come into trouble if his secretary becomes too creative…
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Anything else to consider?

You also have to be aware that there are “chambered” and “non-chambered” professionals. “Chambered” are such professions as attorneys, physicians, architects, and pharmacists. Not chambered professionals are e.g. translators, artists (singing, painting, drawing, etc.), journalists. The chamber is a administrative office ruling on the professional's license to practice. Practically seen, there are only two legal differences between a business and professional:

  • first in tax law,
    and
  • second in formal business (better business registration) law.

To make the right choice between both will be very cost effective in the future.
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How are freelancers treated in tax law?

Generally, the normal rules apply to professionals as well as other companies. Only, if you are self-employed natural person providing professional services, you will not be subject to business tax (Gewerbesteuer). This is the typical exception to this rule.
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I learned that I have to register my profession. Where am I to do it?

As a professional, you do not have to register at the trade office (Gewerbeamt). Every other business must register his or her business! Be aware that the Trade Office might not decline the registration of a professional because this promises the municipality more revenues… If you have mistakenly registered contact your attorney to help you deregister as a trade.
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Overview of the Differences between freelancers and trades

 
Professional
Trade
Compulsory membership at IHK
+
Registration at Gewerbeamt (trade office)
+
Permission from competent authority
- / +1
- / +1
Subject to trade tax
+
Subject to income / corporate tax
+
+
Subject to VAT
- / +2
- / +2
“- / +” implies that
1: the matter depends on the concrete business and no general information is possible,
2: both can be true but the decision needs professional consultation

 


 

The DO's and DON'Ts of Business Names

When trying to come up with just the right name for your business, the options can be overwhelming. The following tips are designed to help you narrow the potential field to make your choice a little easier, and to help ensure that the name you choose meets applicable legal requirements. Though you are free to choose the law sets the boundaries for the choice of your company's name. Below you find a guiding summary to help you choose your business name after having studied the general rules on Business Names.

 

The DO's

DO
consider making the name descriptive, so that potential customers are immediately informed of the purpose of the business. Research has shown that businesses with names that identify their products or services are more successful than non-descriptively named businesses.

DO
keep the description general enough so that you can, if desired, expand into related products or services in the future.

DO
consider the oral impact of the name – how it will sound when spoken. Try writing down a list of words that could describe your business, then mixing them up into different combinations and saying them out loud to see how they sound.

DO
consider the visual impact of the name – how it will look on signs, advertisements, business cards, etc. As with the sound of the words, try playing around with various looks by writing them down on paper or typing them into your computer.

DO
choose a name that is easy to understand, pronounce, and remember.

DO
make the name unique enough to distinguish your business from others in the field.

DO
choose a name that will not be easily imitated by competitors.

DO
consider how the business name could be shortened by the public. Just as a child's initials can spell out an embarrassing word, so could the abbreviation for a business.

DO
come up with a list of several potential names, and then try them out on close friends and family members to get their reactions.

DO
live with your ideas for a while, to see how they sound and feel with the passage of time.

DO
keep alternatives in mind, in the event that further research reveals that the name you would like to use is not available.

DO
consider the meaning of your chosen name in other languages if there is a possibility you could expand into foreign markets. When Chevrolet introduced its Nova car in Mexico, for instance, it discovered that in Spanish "nova" means "no go."

 

 

 

The DON'Ts

DON'T
select a name that is too long or confusing.

DON'T
use your own first or last name as part of the business name if the venture is very risky. If the business fails, that failure will be more closely related with you personally if your name and the business name are the same.

DON'T
choose a trendy name, since trends and fads pass quickly, and you don't want your business to appear outdated.

DON'T
include a geographic designation, like the city or state where the business is located, in the name of your business if you're thinking of expanding into other markets in the future.

DON'T
include unacceptable terms in the name, like profanity or obscenities.

DON'T
imply with the name that your business is somehow affiliated with or approved by a branch of the government.

DON'T
consider names that are very similar to those belonging to other businesses in your area. Not only would such similarity confuse consumers, it may make it impossible to register your business's name or, worse yet, subject you to legal claims by the owners of the other businesses.

DON'T
use names identifying a particular living individual other than yourself, the name of a deceased president with a living widow, names that merely describe your business or that misdescribe your business, primarily geographic descriptions, or names that are primarily your last name if you are considering registering your business name.

 

Relevant eBrochure: Formal requirements for Letterheads