Hey guys! Today's post will cover some more details you might want to consider before selecting a corporate name.
I am a lawyer and have been doing this for more than ten years. I have had the privilege of working with various corporate actors, and that includes incorporators and founders.
Several years ago, when covid first hit, I was of course a bit shocked. As time goes on, I started thinking about how I can give something back to our community. One idea was to create a blog as a source of credible, reliable information. In particular, I hope that this first set of blog posts is helpful for guys (and girls) who may be first-time entrepreneurs.
Today's post is going to go in to lots of detail about corporate names. By the end, you will be ready to pull the trigger.
It's all good, man. Let's do this.
What You Really Need to Know about Corporate Names
Incorporation is a powerful legal structure. It has both legal advantages -- think limited liability -- and financial advantages, such as the opportunity to accumulate retained income in the corpoation at a lower applicable tax reate. We have written a whole post about the leading theories for why a corporation is granted a separate identity as a legal person.
The bottom line is that a corporation is a separate person and it therefore has to have its own specific name. As a first-time entrepreneur, you might have questions about this, you might be wondering whether there are things you have to do or have to avoid in selecting a name. We are going to get into that here.
The two things that you absolutely have to understand about corporate names are that:
- A corporation can be either named or numbered
- A corporate name has three essential elements.
Point 1: Numbered or Named
The federal and provincial governments share jurisdiction over business corporations. To make a long story short, the result is that an entrepreneur in Toronto gets two choices. You may choose
- to incorporate federally under the Canada Business Corporations Act (CBCA); or
- to incorporate provincially under by the Ontario Business Corporations Act (OBCA).
We have compared the key considerations elsewhere, but in either case the corporation must identify itself via either a number or a name.
You may have heard the term numbered company, this simply refers to a corporation that has decided to not use a corporate name. If you incorporate a numbered company, the registry will assign a number followed by the appropriate legal designation.
If you choose to incorporate as a numbered company, and later want to use a corporate name, that is definitely possible.
The only alternative to a numbered company is a named company. Furthermore, if you choose to incorporate a named company, the corporate name must be distinct have three essential elements. This brings us to point 2.
Point 2: A Corporate Name Has Three Essential Elements
A named company has a corporate name that has been chosen by the incorporator, for example Yellowbird Consulting Corp.
When choosing a corporate name you need to satisfy the requirement for three specific elements:
- a distinctive part, e.g., 'Yellowbird'
- a descriptive part, e.g., 'Consulting' and
- a corporate suffix, e.g., 'Corp.'
Let's just briefly, explain the above. Yellowbird is the distinctive element that promotes the corporation's brand. Consulting is the descriptive element describing the nature of the business. And, Corp. is the corporate suffix.
Now, let's get into more detail about these three elements.
Point 3: Does Your Corporate Name Have a Distinctive Element?
A corporate name must have a distinctive element.
The distinctive element identifies the business through a distinctive word or set of words. There is going to be a spectrum between the highly distinctive and the less distinctive. A coined or made-up word is likely to be highly distinctive. A person or place name is likely to be less distinctive.
Let's consider a hypothetical named company called Yellowbird Consulting Corp.
The word 'Yellowbird' is the distinctive element in this corporate name. Yellowbird is not at the extreme end of the highly distinctive continuum. It could be made more distinctive by using synonyms, such as 'Goldenbirds'; but, then again, it is more distinctive than simply 'Yellow.'
For a few more thoughts on this balancing act, see 'Your Corporate Name Must Be Unique' below.
Sufficient distinctiveness is one consideration. At the same time, the word or set of words used for your distinctive element is going to be an important part of the brand that the corporation builds around its business.
Point 4: Does Your Corporate Name Have a Descriptive Element?
A corporate name also should have a descriptive element.
The descriptive element indicates the main activities or type of business in which the corporation is engaged.
Let's go back to the example of Yellowbird Consulting Corp. 'Consulting' is going to be the descriptive element in this corporate name. The incorporator could just as well use words such as 'Advising' or 'Counselling'.
Point 5: Does Your Corporate Name Have a Legal Element
Finally, a corporate name must have a legal element. This is also referred to as a corporate suffix.
Because corporate names can be in either French or English, there are two sets of corporate suffixes that are available. The first set is English, i.e., Limited, Ltd., Incorporated, Inc., Corporation, Corp. The second set is French: Limitée, Ltée, Incorporée, Inc., Corporation, Corp.
The incorporator therefore has a total of 12 legal identifiers to choose from. But, once a specific suffix is registered with the corporate name, the expectation is that only that suffix gets used.
So, for example, 'Corp.' is the corporate suffix in Yellowbird Consulting Corp. It would be incorrect to refer to this corporation as Yellowbird Consulting Incorporated or Yellowbird Consulting Corporation.
Your Corporate Name Must Be Unique
Now that you have put together the three required elements, you are going to want to check that your name is unique.
You do this by obtaining a name search report, which is often referred to as a NUANS report. NUANS refers to a specific, commercial database of corporate names.
The report consists of the results of a search where your proposed name is put into the database, and the most similar existing, registered names are displayed.
Let's look at this in terms of the hypothetical of 'Yellowbird Consulting Corp.'
It may well be that there are already registered corporations in Ontario that have the distinctive element 'Yellowbird', e.g., "Yellowbird Dynamics Incorporated". In that case, generally speaking, Yellowbird Consulting Corp. and Yellowbird Dynamics Incorporated are sufficiently different that Yellowbird Consulting Corp. would still be considered unique.
If, however, the name search report indicates that there is already a registered corporation with the name "Yellowbird Consulting Corporation", well then you are out of luck. Why? Because Yellowbird Consulting Corp. and Yellowbird Consulting Corporation are sufficiently similar that Yellowbird Consulting Corp. would not be considered unique.
Odds and Eds
There are other rules against obscene names. Also, this being Canada, there is a rule stipulating that a corporate name may be in either French or English and that it must not imply a connection to the royal family.
The Takeaway
The basic principle is that a corporate name has three parts and that it must be distinct.
That is all, Folks
Thanks for reading today's post. I hope it helped you feel more confident about the details of selecting a corporate name.