Picking a Name For Your Company

If you plan to promote your business through its name (as most do) then selecting the right company name can be very important for both legal and esthetic reasons.

Overview

Ideally, a company name should be memorable, intuitive, and reasonably easy to spell. Most company names are comprised of three parts: something unique, something descriptive and a legal designation (Incorporated, Limited, Corporation, Registered or the abbreviation of one of these). e.g.,

Unique Descriptive Designation
Smith Construction Inc.
Lake Ontario Marine Services Reg'd.
Nature's Wonder Herbal Medicine Limited

When Incorporating a company, the name (not including its designation) must not exactly match that of any other corporation. Two incorporated companies cannot have the same name, but you are allowed selecting a company name which is very similar to another, despite the legal implications of doing so (see below). You may also incorporate a company that has the same name as a Registered (Reg'd) company.

You cannot incorporate a company with just someone's name (J.B. Smith Inc.) or just a descriptive portion (Construction Corp.).

Legal Implications

It is a good idea to pick a name for your company that is distinct from all others, or at least distinct from all others in your industry.

In general, if the public perception of your new company is too similar to that of an older company, the older company can take you to court and force you to change that perception. This might mean forcing you to change your company's colour scheme, style of advertising, and it might involve changing your company's name if it is too similar to theirs.

If you would like to use a name similar to that of an existing company, first try to make the case for the other company and see how well you feel you would do in court. Here are some criteria a judge would consider:

  • Which company was in business first?
  • Did the offended company pick a name that is too general (in which case it will be much harder for them to win).
  • Do the companies operate in the same industry?
  • Do the companies operate in the same region?
  • Which company does more advertising?
  • Do the companies have similar branding (color/style of ads, etc.)?
  • From where does each company draw its new clients?
  • Were any jobs awarded to one company because the client mistakenly thought it was the other company?
  • Etc.

If your company does get hired as a result of the similarity of your name to another company, the other company could not only force you to change your name, they could also seek damages for all the proceeds and benefits they would have received if they had been hired by that client.

The general guideline in these types of cases is whether or not the public was somehow confused by name of the company. For example, it would be easy for the public to confuse "A.J. Smith Construction" with "H.J. Smith Construction" (similar sounding) or "A.J. Smith Renovations" (uses an industry synonym). But it would not be likely that someone could confuse "Jerry Smith Construction" and "Jezebel Smith Construction."

That all said, there are an awful lot of incorporated companies with similar names working in the same industry and region that never bother each other, and don't go to court to try to get the others to change their names. Few people ever take these types of cases to court (even where they have a right to do so) because:

  1. Going to court is very time consuming.
  2. Going to court is very costly.
  3. The majority of businesses are small businesses that operate by word of mouth, and therefore are not hired on the basis of a broad public perception.
  4. There is rarely a loss of good will or revenue because of similarly named companies.

Deciding to use a company name which is highly distinct from any other name makes judging the risks associated with that name quite simple (i.e., the risks are very low). Where small businesses are concerned just about any name is reasonably safe, but it is something that each business owner must judge for themselves, or ask the council of a lawyer.

COMMITTED TO INCORPORATING YOUR COMPANY
THE RIGHT WAY, THE FIRST TIME


Recipient Of
The Oakville Beaver's
Readers' Selection
1st Place Diamond Award
in the category of
Incorporation Services
for ELEVEN YEARS in a row