Choosing a company name . From a legal standpoint how does it work . I have the standard last name construction co . format . Not to worried about that . Considering another option . Do you register your name or license it to protect it ? Can someone else have the same name ? Any info appreciated .
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Replies
Depends on state law. I think as a minimum you need to register the name with the state or locally as a "DBA" name, so that legally folks can associate the name with you. You can go beyond that and claim it as an unregistered or state-registered trademark, but that can get murky, especially if the name isn't totally unique. The ultimate protection is a trademark registered with the Library of Congress.
You do want to avoid infringing on someone else's state or federal registered trademark (Google is handy for this, and probably the Library of Congress has a way to check) and avoid duplicating the DBA name of someone else in your locale.
Note, however, that the same name can (sometimes) be legally used by different people for different types of businesses. You could, eg, be Buildmatic and not NECESSARILY conflict with a computer outfit by the same name. It gets murky.
...
Oops -- I think it's copyrights that go through the Library of Congress. Trademarks go throug the Patent Office.
happy?
Edited 2/19/2006 9:58 pm by DanH
okay , I am with you so far and appreciate your input . I don't want to duplicate names . Will they tell you if you choose the same name someone else already has . Can you find out via net if name is already taken ?
The federal trademark and patent office I think has an online search of trademarks. Google for it or start at http://www.firstgov.gov/For the states you need to state's web pages, most like the Secretary of State is the one that records the registered business names.
If you are NOT a corporation, you normally take out a DBA at your county office (at least here in MI) and they do a search to make sure no one else has the same name in that county.
If you are a corporation, same thing but the search is state-wide.
Rules and procedure may vary at your location.
DG/Builder
Here in WA, when you incorporate the state either sends you the completed paperwork (if your name goes thru) or they don't (if someone else has it).
If you are a sole prop or a partnership, and you're going to use a DBA, then you run an ad in the legal notices section of the classifieds. That essentially 'date stamps' your use of the name. It does nothing to confirm or deny that someone else is already using it first. I don't actually think there's a way to do that here. If you use WallKicker Construction as your DBA and someone else is already using it.... no problem unless they sue you to stop.
Thanks for the info. guys . You have me wondering about one more thing . I obviously need to reference some of this but on the quick is it better to incorporate for a one man operation ?
try a Limited LIability Company. For tax purposes it is treated as a sole propreitor. If you have a corp. in Fl., there is an additional return to be filed. If you have partners, you must also file an information only return on an LLC.
Most people start out as a sole proprietor (seems like) and for small operations say 50K- 100k/year it is most likely fine. When you start doing more business and have more to lose it's better to go LLC. If your doing just trim work SP is fine, if your building ten houses a year LLC seems a better way to go. That way if you are sued for anything your personal assets are protected, those not tied in with the company.
If I was starting out again I would do LLC just for piece of mind, might be a bit more paper work for the business but not much. You can always switch from SP to LLC later if you wanted.
Jeff
If your doing just trim work SP is fine
That statement is not necessarily true. You are implying that doing "just trim" work somehow reduces your exposure to liability issues.
If you are doing "just trim work" and you go out to your truck for lunch, and someone cuts their hand off in your mitrebox, do you lose everything you've ever owned because of negligence?
I don't know the answer....I'm just trying to show how easily the question gets muddled up.
blue
I don't think any contractor should be a sole prop, for the reason you mentioned. Low volume and/or simple projects with limited scope do not limit your liability.
Wasn't there a thread about a week ago titled 'the Fire Men' or something like that? Some guys moonlighting on a weekend who thought they started a major structure fire?
However, a corp or LLC does not limit the liability of the INDIVIDUAL that was actually responsbile for the damages.If John Doe Fine Home Finishing, LLC which is owned by John Doe then hires John Doe to install and finish trim in a house and John Doe leaves an oily rag and burns down the house two enities are going to be sued.John Doe Fine Home Finishing, LLC - but JDFHF only has a few hundred dollars in assest in terms of a miter saw and nailers. So they are going to get much from him.But they will also sue John Doe, stupid employee that left the rags. Now John Doe is "rich" from all of income and profits that he has made from JDFHF.
Bill is correct. For a single owner/proprietor there is no protection against liability regardless of the business format. You simply cannot hide, so it's better to carry sufficient insurance and keep your nose clean.
The concept of no liability for a shareholder in a corp. works OK if you own Exxon stock and Exxon gets sued. But if you and two buddies form a corp. and then screw somebody, the court will most certainly find you personally liable. It's the concept of the closely-held corp.
DG/builder
Actually single owner can get protection from a corp or LLC.Just not for the acts that they personaly do.For example if rental property is put into an LLC then it can protect you personally against a claim that someone might have if they are injured on that property.Or if you have employees. And the employee causes the damage.
Bill, I don't want to start a debate, but I stand by my statement.
If you own rental property and you are the owner and actively manage it (as opposed to being one of 1,000 passive investors in it), then an injury claim will normally be based on some alleged negligence on your part, both personally and as an officer of the corp. No hiding there.
If you have employees and an employee causes damage, the damage is usually small enough to be covered by your (hopefully adequate) insurance. If the employee causes huge damage or injury or death, the plaintiff's attorney will without a doubt allege that you negligently failed to train, supervise, properly equip, etc. that employee, so no hiding there either.
You don't need to DO something to be liable. Omission is just as powerful a legal concept as commission.
The point you guys are missing is the intent of the law, which is never lost on judges. The point of a corp. is to allow a little old lady to invest in IBM and never lose more than her investment. It is not to allow Joe Contractor to do whatever he wants with no consequences.
DG/Builder
DG-
I handled insurance defense cases as a lawyer in NY for 22 years, did some plaintiff's work too. I worked for Aetna, Allianze, Hartford, CNA, Crum and Foster and others.(Sent out the last bill on a defense case last week.) Bill and I have gone down this road before. The fear of personal liability is overblown. Unless it was an auto accident, the plaintiff's lawyers did not typically sue an individual contractor. In thousands of cases, I don't think I saw a half dozen suits against individuals.
The reason is that they usually don't have any money worth going after and nobody needs a worthless paper judgment. The individual is covered by the same insurance anyway. Probably 97% of the cases settle before trial. Even the ones that go to trial often settle for the insurance poplicy limits except in really rare circumstances. I've seen 18 million dollar judgments against companies settle for 2 million dollar policies.
As far as individual liability for corporate officers, I've seen those thrown out typically. Judges recognize that the corporation is a shield, and if they are acting in a corporate capacity when they do what they do, they are pretty safe. This is not shareholder liability, it's liability to third parties for negligence.
Don K.
EJG Homes Renovations - New Construction - Rentals
Don, I agree. The fear is overblown. A properly insured contractor has an insurance company with competent legal counsel to defend him (actually to defend their money, but defend the contractor in the process as well). I have yet to see an innocent contractor being ruined by a "hot coffee in the lap" lawsuit.
In my experience, contractors need to spend more time and effort running a good and safe business instead of hiding assets. A while ago in my neighborhood I watched a small crew of "entry level" workers do some demolition on a house. 2 guys were ripping the roof rafters about 25' up and throwing lumber to the ground. 2 others were picking up the lumber and taking it to the dumpster. None of them wore hats or shirts. 2x6s routinely missed the guys on the ground by a foot. The contractor himself was not on the premises. Months later I found out from the neighbor that the addition they put up had severe ice damming and a lot of ruined drywall. So you know that this contractor will sooner or later get sued. Not real hard to see it coming, either.
DG/Builder
DG - Since this is a site frequented by builders, homeowners and designers, I should also say that architects and engineers were sued a little more often. (Most of my work was construction litigation for about 15 years, especially for design professionals.) I think it was more that plaintiffs lawyers saw them as deep pockets, like doctors, together with the fact that the individual's name was stamped on the drawings. In terms of frequency, I would say maybe 3% of the time, that happened. Even though they were named as individuals in the suit, they were also insureds on the firm's professional liability policy. I saw a few that were uninsured and judgment proof, and boy did that pizz plaintiff's lawyers off.
One of my pet peeves with design professionals was that some of them would tell the clients how good it would be if they conducted site visits (for a fee of course), then something would go wrong. All of a sudden, they had forty excuses why they weren't responsible for the contractor's work or the problem that had arisen. When they sold the job, they gave the client unreasonable expectations. I guess that could apply to builders too.
Don K.
EJG Homes Renovations - New Construction - Rentals
Don, how does one go about being uninsured and judgment proof?
Just curious, Ive never heard of such a thing other than being more in debt that having assets.
blue
Blue - To be uninsured, just don't pay for insurance.
To be judgment proof, don't put any assets in your name and keep some debt. This way if you get hit with a judgment, you can march down to the local bankruptcy court and discharge it..
It works for corporations, LLCs and it works really well if you are married (or whatever) and put all your assets in your "wife's" name. Then again, you better really, really, really trust them. LOL.
For more details, you need to speak to deadbeats. Some of them have taken it to an art form.
Don K.
EJG Homes Renovations - New Construction - Rentals
Don, I believe in some "community property" states you would need to put all the assets in your wife's name and then divorce her to put the assets out of reach. Is this not true?
I can see it now: Honey, if you really love me, go empty all our bank accounts and divorce me before next Wednesday 7:30 AM :)
DG/Builder
DG - I really don't know the rules on community property states. I am licensed in NY and that's not the situation here. We are not comunity property. I had one client that fell into this category from Florida, which I believe is community property, and the other lawyers pretty much walked away from him and left him alone. He really had a strong defense though - and a good lawyer too. <G> Just for the record, he came to me without assets, not something I recommended or set up.
Don K.
EJG Homes Renovations - New Construction - Rentals
Bill good points.
That leads us to the next level of protection: how do you retain your assets and protect them from the sharks.
Tusts. LLCS. Limited Partnerships, etc, etc, etc. The more you have, the more you need to learn about these techniques and many others.
That discussion is beyond the scope of the original question, but it demonstrates that you have to start your fortress somewhere. Creating a family trust, and owning the shares of that LLC within the trust would probably be the best suggestion but for someone starting out, simply forming an LLC or Corp is probably the better idea.
All this is so complicated...maybe we should all just jump off the Brooklyn bridge.
Is that high enough to do us all in?
blue
"All this is so complicated...maybe we should all just jump off the Brooklyn bridge. "
Don't do it... contractors will get sued and lose their assets.
Well my daddy tuaght me long ago if all the contractors jump off the Brooklyn bridge not to follow them.
Blueeye:
True, I guess I made a general statement. I was thinking more on the line if you do something let's say less risky. Where you have less things to go wrong or your exposure to liability is reduced then a SP is fine. Of course anything can go wrong you might be doing a simple trim job "hanging one door " for someone then you turn around the customer trips over your airhose and breaks a hip. I was thinking in general one guy doing one thing like tile work or trim work will have less things to worry about than say the general contractor doing all the work himself.
I'm not trying to imply that by being a finish carpenter, tile installer or whatever sub you take on doesn't have it's own liability issues. Just that if I do one aspect of the building rather than ten things I reduce my exposure or chances of having something go wrong. It is true that the one "thing" that happens can be bigger than if ten little things happen but you get the idea right?
Jeff
It's one to think you might lose your bank account or house, but even scarier is the thought of losing your future earnings.Nobody doing anything in someone's house ought to be SP. Don't do as I do, do as I say - but I've got the S-corp papers in front of me waiting to sign them...JT
I pay about $500 per year to file an annual report and get an 1120 done for the IRS. Other than that we have some meetings and keep minutes. ANYTHING you do should be on the minutes, such as opening credit accounts, making large purchases, etc. I'm actually going to spend an hour with my attorney this spring reviewing the corporate records.
Apparently an LLC is easier and cheaper to maintain, however we were advised to incorporate and I see that most contractors here are, very few are LLCs.
Wallkicker, no one could possibly tell you what is best for you without thoroughly reviewing your business plan. Consulting your professional team will be critical for starting up properly. Your team will consist of a CPA who will advise you on tax issues. You will also need a Lawyer who will advise you on liability issues. An insurance professional will advise you on protecting you with insurance. After reviewing what all three have to say, you ultimately will have to make the determination of what's best for you. Remeber, you are the boss, manager, CEO, President etc. You wear all the hats.
This might sound a bit more complicated than you thought it might be, but that's only because it IS!
I always suggest starting by reading a couple of books before you wander into a Lawyer or CPA's office. If you don't have a basic idea of what you need to discuss, you won't truly benefit from the conversations because you'll be lost in the lingo. Think of how lost the young folks are when they start their first day in the trades. If a carpenter starts talking about Friezes and Linial and Stringers and IPE and polarization and thermal inequities, the apprentice would be speechless and probably not retain anything from the conversation. That same thing will happen to you if you don't formulate a basis for conversation when dealing with your professional advisors. You will end up spending a great deal of time and wasting the money that you have to pay for the consultation. I know....I've done that!
A primer that I recommend is found in the Robert Kyosaki "Rich Dad Series". Robert has put together some interesting and easy to read materials that might be of value to you. A trip to the library will yield countless books on entity discussions.
Enough of the disclaimer: Now for the quick answer that you sought.
A Corp might be better liability protection but only if you do it right. There are a lot of formalities to adhere to and potential double taxation issues.
There no quick answer and if you do a search in the archives here, you'll see tons of discussion regarding this exact topic.
blue
In Oregon, you can register the name by county or whole state. The pricing is more for the state registration. So it is possible, in theory, for a differant person to register the same name in each of the counties and all of them being separate companies with no connection to each other.