A business owner may desire to alter the name of their limited liability corporation for a number of reasons (LLC). Refer to this post for information on how to alter the name of your LLC and when is the ideal time to do it.
Reasons to Change Your LLC to a Corporation
For a number of reasons, business owners may contemplate changing from an LLC to a corporation. Here are a few examples of the most common:
You intend to raise funds from investors. Typically, investors choose to invest in firms. Why? Because companies have defined and transferable ownership shares, it is simpler to purchase and sell holdings in them. Corporations may also issue a different class of shares known as “preferred stock,” which investors often find appealing.
You intend to do a public offering. If you want to execute a public offering of common stock in the future, you must first establish a company.
You wish to compensate by issuing shares. It is significantly simpler to issue stock as compensation to original investors or organisers, or to periodically distribute it to staff as part of their regular salary, as a corporation rather than an LLC.
You want to be a part of a startup accelerator. Startup accelerators or incubators sometimes need incorporation since they accept equity.
You’d want to reduce your self-employment taxes. Members of an LLC must pay Social Security and Medicare taxes on their portion of the company’s earnings. In a company, owners are paid like other workers and must only pay taxes on the amount of their remuneration. Importantly, an LLC may elect to be taxed as a corporation without converting.
Reasons for Changing Your Name
For a number of reasons, you may decide to alter the name of your limited liability corporation (LLC). The most prevalent explanations are as follows:
Making a Change: If a typographical mistake arises on your company registration documents, you may just need to change the name of your LLC.
Avoiding Brand Confusion: If customers often mix your firm with another, your existing business name may be impeding your development and sales. As a result, it’s probably time to investigate a different choice.
Growing Your Business or Changing Your Industry, Products, or Strategy: If your company’s first name seems to be restrictive as it expands, a larger name may suddenly feel more suitable. Consider a company that sells books and incorporates the term “books” into its name. If the firm begins to offer movies or other services in addition to books, the owner may choose to remove the word “books” from the company name. You might also consider changing your company name if you enter a totally new sector or if your company name refers to your hometown and you extend outside that city, state, or region.
Updating a Legacy Name: If your company name refers to someone who has departed or died, the present name may no longer accurately reflect the firm. Of fact, some company names may survive their creators. The Walt Disney Company and Johnson & Johnson are two excellent examples.
Addressing a Trademark Issue: If your firm’s name is too similar to another company in the same sector, a court may require you to alter it.
Rebranding: In certain cases, it may be important to rebrand your company. For example, Google was formerly known as “Backrub.” However, urging them to “Backrub it” rather than “Google it” simply doesn’t seem the same. If your company’s name is too generic, consider changing it to something more distinctive to help you develop brand recognition. If you feel that rebranding would assist your firm for other reasons, you may need to modify the name as well.
Consider Obtaining a DBA
DBA is an abbreviation for “doing business as,” which is also known as a false name, trade name, or assumed name in certain areas. Keep in mind that registering a DBA does not create a company, but rather a single proprietorship. In certain cases, an LLC may want to register a DBA. Perhaps your LLC’s name is JW Enterprises LLC, but you’d prefer to conduct business as JW Books for your bookshop. JW Enterprises LLC may apply for a DBA in order to utilise the name JW Books. JW Books is renamed JW Enterprises LLC, which remains the same corporation. If you don’t need to alter your name, registering for a DBA may be an excellent solution.
Here are some important points to consider when deciding whether or not your LLC should register for a DBA:
Will your LLC do business and function under its real and legal name? If the answer is affirmative, you do not need a DBA. If you answered “no,” your LLC should apply for a DBA.
Do you have many firms or microenterprises operating under one LLC? If you answered “yes,” then registering a DBA for each firm might help you separate them. If your company grows and your liability exposure grows, you may want to consider incorporating a new LLC.
Is your LLC running many businesses with various names? If so, you may wish to apply for a DBA in this case as well.
Is your company a franchise? If you own a Taco BellTM franchise, for example, you will almost certainly incorporate an LLC under your own name. As a franchise, though, you must utilise the Taco Bell name. That is, your LLC would register a DBA under the name Taco Bell. Remember that you may only do this because you have a franchise agreement to utilise Taco Bell’s name and brand. A DBA that would infringe on someone else’s trademark cannot be registered.
These are just a few of the reasons you would want to file for a DBA; you may have more. Consult an attorney if you are unclear if you should register for a DBA.
Rebranding Is More Than Just Changing Your Name
Rebranding entails updating your company’s image and identity, and it extends well beyond the design of your logo. In reality, your brand influences how people perceive your organisation and what they identify with it.
So, why should you think about rebranding your company?
Mergers and acquisitions, repositioning the firm, shifting markets, dealing with a controversy or a negative reputation, expanding into new markets, updating an old image, a new CEO, a creative challenge, or a developing brand portfolio are all typical causes. If you’re thinking about rebranding for whatever reason, be sure you properly prepare and execute your rebranding strategy beyond just adopting a new name.
When Is the Best Time to Rename Your Company?
Changing your company’s name may be time-consuming, so be sure to carefully evaluate all aspects of the change before proceeding. If you believe that a name change is the greatest step for your company, the ideal timing to make the change will be determined by your evaluation of the following essential factors:
Why are you thinking about changing your name? Are you looking to enter a new market, settle a trademark dispute, or rebrand for another reason? If you are obliged to alter your business name, such as for trademark purposes, the ideal time to do so is soon after receiving the order to do so.
How much will the change cost? Consider the expenses of designing a new website, logo, letterhead, signs, and anything else that incorporates your business name in addition to revising your operating agreement or applying for a DBA. Are you financially able to alter your company’s name based on the expected costs?
Have you examined the benefits and drawbacks of altering your company’s name? Cons may include the expense and complexity of altering your company’s name, while benefits may include increasing (or restoring) customer trust and/or revenues.
Do you have a brand plan in place? Make certain that your new business name is consistent with your company’s brand and brand promise.
In certain situations, you may be forced to alter the name of your company and must do so as quickly as feasible. In other circumstances, you may assume that rebranding would help your company expand. In such cases, the optimal moment to alter your company’s name is when the advantages balance the costs of rebranding based on your assessment of the aforementioned considerations.
Procedures for Changing the Name of Your LLC
If you’re ready to modify the business name of your LLC, do the following steps:
Consult your operating agreement. Your operating agreement may specify the steps you must take to alter the name of your LLC.
Make a resolution for each member. It is critical to document your name change so that you have a written record.
Change your name according to the state. Fill out the necessary papers with your state to alter the name of your LLC. This usually entails amending your articles of incorporation.
Make payment for the filing fee. To handle the paperwork related with your company name change, most states charge a filing fee. While the amount varies by state, it usually ranges between $20 and $150.
Make a name change with the Internal Revenue Service. After filing your company name change with your state and receiving permission from the state, you should register your name change with the IRS. The IRS has varied criteria based on the kind of company, so be sure to check the IRS website for any special regulations that may apply to your LLC.
Inform everyone about your new name. Make sure your clients and any other third parties you operate with, such as suppliers, banks, and credit card firms, are aware of your name change.
Summary
There are several reasons why you would want to change the name of your LLC. If you assess the major reasons and conclude that a name change is the best option for your company, be sure to follow the procedures indicated above to ensure a seamless transition. Consult an attorney if you are confused about changing your company name or need assistance with the procedure.