If business owners decide against forming an entity, they will continue as a sole proprietor or an unincorporated partnership – and thus not enjoy any additional liability protection. If they do choose to form an entity, they will likely choose an LLC or corporation. The two entities have some features in common, including:
Name – Each LLC or corporation must have a name that is different from any other LLC or corporation in existence in the state of formation. The name does not have to be the business or trade name of the venture, and it does not have to be all that different from that of existing businesses. It is important to understand what rights incorporating under a particular name gives a company. When a founder selects “ABC Ventures LLC” as its name, and it is accepted by the Secretary of State, no other LLC or corporation can form under that specific name. But that does NOT give ABC Ventures LLC’s founders any trademark or copyright protections, and it’s possible that another venture could adopt the exact same name in a different state. Likewise, another business could slightly tweak the name and form a new entity, including something as similar as “ABC Ventures I, LLC” “ABCD Ventures LLC” or “ABC Missouri Ventures LLC.” And the mere act of incorporating does not stop a sole proprietor or partnership from doing business as “ABC Ventures” (without the LLC designation) in the same state. Finally and of key importance, securing actual and further superior rights and protections in a business name requires trademark and other intellectual property efforts – merely incorporating under a particular name does NOT establish a formal trademark or copyright.
Intellectual Property – Intellectual Property or “IP” is the general term applied to creations, inventions or expressions and fall into four basic categories: Patents, Trademarks, Copyright and Trade Secrets. When a person invents a product (patent), designs a novel business logo (trademark), or authors a unique writing (copyright), and then acts to formally protect that item, they can gain superior and exclusive rights to the same. An entity or founder with a unique product, process, name, logo or writing or other expression should consider pursuing IP rights through their legal counsel. Again, mere formation of a statutory entity does not grant any formal or government-recognized legal rights in intellectual property.
Registered Agents – Each statutory entity must have a Registered Agent and Office. This person or firm serves as the formal representative of the company for service of process (this is who will get served with court papers if the entity gets sued). The registered agent must have a physical address in the state of incorporation or organization, and agree to accept service. Founders can be registered agents and use their home address for the registered office, but for privacy or convenience purposes, many elect to have a lawyer, accountant or other professional serve as their registered agent. There are also corporate services firms that provide registered agent services in each state.