Is there a significant benefit to using a ficticious name when incorporating?
August 15, 2007 8:13 AM Subscribe
Is there a significant benefit to using a ficticious name when incorporating?
As a sole proprieter I'm currently doing business under my own name which makes sense as name recognition is important to how potential clients find me. I'm in the process of incorporating and have been told that using a ficticious name adds a layer of protection when being sued so that the plaintiff knows they're suing a corp. and not a person. Does it matter if my corp. is named after me i.e. Joe Blow photography Inc. versus Super Rad Photography Inc.?
As a sole proprieter I'm currently doing business under my own name which makes sense as name recognition is important to how potential clients find me. I'm in the process of incorporating and have been told that using a ficticious name adds a layer of protection when being sued so that the plaintiff knows they're suing a corp. and not a person. Does it matter if my corp. is named after me i.e. Joe Blow photography Inc. versus Super Rad Photography Inc.?
Naming your business after yourself has a couple of big pitfalls.
What if your business tanks royally? Your name will be associated with that tanking.
What if you sell your business? You might end up losing the rights to use your own name.
posted by crickets at 8:45 AM on August 15, 2007
What if your business tanks royally? Your name will be associated with that tanking.
What if you sell your business? You might end up losing the rights to use your own name.
posted by crickets at 8:45 AM on August 15, 2007
Response by poster: Crickets - I can say with near 100% certainty that neither one of those scenarios wll apply to me. I could not make a dime this year and it wouldn't matter to anyone but my wife and what my company offers is my "talent" or "craft" as a photographer and nothing else.
My main worry is if I'm on a shoot and a big heavy light stand falls over and kills Michelle Pfeiffer that I won't lose my shirt because I named my corp after myself.
posted by photoslob at 8:55 AM on August 15, 2007
My main worry is if I'm on a shoot and a big heavy light stand falls over and kills Michelle Pfeiffer that I won't lose my shirt because I named my corp after myself.
posted by photoslob at 8:55 AM on August 15, 2007
Photoslob, are you sure that you'd never ever conceivably want to sell your business? Remember, doctors sell their practices, and studio photographers could certainly sell their practices. My sister in law was a clothes designer, and she sold her business (which involved, unfortunately, selling her name because the business called "Jane Doe Designs").
posted by alms at 9:02 AM on August 15, 2007
posted by alms at 9:02 AM on August 15, 2007
Response by poster: If I was setting up a studio where I primarily did wedding or senior photography and employed a staff that would be cause for concern but I'm an editorial and ad photog who employs no one and will never partner. I'd stick with being a sole proprietor except that I'd like to take advantage of the minimal tax benefits and liability protection of a corp.
posted by photoslob at 9:23 AM on August 15, 2007
posted by photoslob at 9:23 AM on August 15, 2007
essexjan has it right.
so that the plaintiff knows they're suing a corp. and not a person
The "Inc." provides this clue. I'm not entirely clear what your sources' reasoning is. Different places of incorporation have different rules on naming/indicating corporate status, but beyond that, I'm at a loss for what they're talking about.
My main worry is if I'm on a shoot and a big heavy light stand falls over and kills Michelle Pfeiffer that I won't lose my shirt because I named my corp after myself.
This hypothetical doesn't get at what you want to know. You'd lose your shirt because you dropped a light on Michelle Pfeiffer, not because of the corporation's name. So...safety first. Maybe send Ms. Pfeiffer to a less kill-y studio. But look at it this way:
Mr. A forms the corporation "Mr. A, Inc." Circumstances arise in which the corporation is solely liable for the wrongful death of celebrity P. Assuming there are no grounds for piercing the corporate veil, a judgment against Mr. A, Inc. will not reach Mr. A's personal, non-corporate assets. People may hate him, though.
No offense, but it sounds like you have a less than complete understanding of corporate entities. You may want to chat with an accountant and a lawyer to just sort out the details and make sure the benefits are what you think they are.
posted by averyoldworld at 9:39 AM on August 15, 2007
so that the plaintiff knows they're suing a corp. and not a person
The "Inc." provides this clue. I'm not entirely clear what your sources' reasoning is. Different places of incorporation have different rules on naming/indicating corporate status, but beyond that, I'm at a loss for what they're talking about.
My main worry is if I'm on a shoot and a big heavy light stand falls over and kills Michelle Pfeiffer that I won't lose my shirt because I named my corp after myself.
This hypothetical doesn't get at what you want to know. You'd lose your shirt because you dropped a light on Michelle Pfeiffer, not because of the corporation's name. So...safety first. Maybe send Ms. Pfeiffer to a less kill-y studio. But look at it this way:
Mr. A forms the corporation "Mr. A, Inc." Circumstances arise in which the corporation is solely liable for the wrongful death of celebrity P. Assuming there are no grounds for piercing the corporate veil, a judgment against Mr. A, Inc. will not reach Mr. A's personal, non-corporate assets. People may hate him, though.
No offense, but it sounds like you have a less than complete understanding of corporate entities. You may want to chat with an accountant and a lawyer to just sort out the details and make sure the benefits are what you think they are.
posted by averyoldworld at 9:39 AM on August 15, 2007
I'm a sole proprieter. I do business under my own name, although I have a company name. The company name allows me to later sell my company (if I feel like incorporating) without losing the name and offers the protections noted above. But I still do most things under my own name, since the branding is so much stronger when you're a consultant. People associate you with the company. However, all my contracts and copyrights say the name of my company.
You can also do business under your own name (one company) and then run it through your incorporated company. See an accountant, though.
posted by acoutu at 9:49 AM on August 15, 2007
You can also do business under your own name (one company) and then run it through your incorporated company. See an accountant, though.
posted by acoutu at 9:49 AM on August 15, 2007
Response by poster: Avery,
No offense taken - that's why I'm asking the question. I've spoken to an accountant and I'm trying to find a lawyer in my area who deals with small biz's.
As for killing Michelle Pfeiffer, I would certainly hope it would be an accident! What I'm getting at and you answered is that my personal assets would be protected if such an event occurred while on my set provided I'm an Inc.
posted by photoslob at 10:50 AM on August 15, 2007
No offense taken - that's why I'm asking the question. I've spoken to an accountant and I'm trying to find a lawyer in my area who deals with small biz's.
As for killing Michelle Pfeiffer, I would certainly hope it would be an accident! What I'm getting at and you answered is that my personal assets would be protected if such an event occurred while on my set provided I'm an Inc.
posted by photoslob at 10:50 AM on August 15, 2007
It's possible for a court to 'lift the corporate veil' and hold a shareholder liable for a company's actions, but the circumstances in which this would be done are not set in stone.
posted by essexjan at 12:25 PM on August 15, 2007
posted by essexjan at 12:25 PM on August 15, 2007
Dropping a light stand on Michelle Pfeiffer? Oh, dear god, no. Please, if it comes to that, drop it on yourself instead. The world (at least the men in it) will understand and appreciate the sacrifice.
You might want to ask your lawyer/accountant about an LLC as an alternative to a corporate structure.
posted by trinity8-director at 3:59 PM on August 15, 2007
You might want to ask your lawyer/accountant about an LLC as an alternative to a corporate structure.
posted by trinity8-director at 3:59 PM on August 15, 2007
IANAL, I think the main reason for a fictitious business name is so that people don't drop the photography, Inc. off the payee line of the check when they write it to you, and so that you don't drop the photography, Inc. off the back of your name when you set up contracts and agreements.
You can structure a corporation with your own name in such a way as to keep business and personal separate, but it might be best to use a fictitious name (and bank accounts associated only with that name) so that you cannot possibly commingle funds, or set up an agreement or contract that is in anyway ambiguous as to whether it is personal or business.
posted by BrotherCaine at 3:55 AM on August 16, 2007
You can structure a corporation with your own name in such a way as to keep business and personal separate, but it might be best to use a fictitious name (and bank accounts associated only with that name) so that you cannot possibly commingle funds, or set up an agreement or contract that is in anyway ambiguous as to whether it is personal or business.
posted by BrotherCaine at 3:55 AM on August 16, 2007
What I'm getting at and you answered is that my personal assets would be protected if such an event occurred while on my set provided I'm an Inc.
Glad we're helping, photoslob. Just to be clear, though, incorporation isn't a panacea - it limits its owners' liability for acts of the corporation. One of the premises of my hypothetical scenario was that Mr. A had no personal liability. But if Mr. A has $1 million in personal assets, and Mr. A, Inc. has $10K in assets, and Mr. A is the person who accidentally drops the light on celebrity P, well...Mr. A may be in trouble. Ms. P's estate is certainly going to go where the money is.
This particular question is definitely one to ask your attorney, and other people have given you great ones as well. What BrotherCaine says about people accidentally dropping the Inc. off when writing you checks and how to deal with that so it doesn't pierce the corporate veil, as essexjan mentioned, should also be at the top of your list, along with what the upkeep in fees and paperwork is going to be. My dad formed an LLC last year and was sort of irritated to find that he had to file an annual report with his state.
posted by averyoldworld at 6:26 AM on August 16, 2007
Glad we're helping, photoslob. Just to be clear, though, incorporation isn't a panacea - it limits its owners' liability for acts of the corporation. One of the premises of my hypothetical scenario was that Mr. A had no personal liability. But if Mr. A has $1 million in personal assets, and Mr. A, Inc. has $10K in assets, and Mr. A is the person who accidentally drops the light on celebrity P, well...Mr. A may be in trouble. Ms. P's estate is certainly going to go where the money is.
This particular question is definitely one to ask your attorney, and other people have given you great ones as well. What BrotherCaine says about people accidentally dropping the Inc. off when writing you checks and how to deal with that so it doesn't pierce the corporate veil, as essexjan mentioned, should also be at the top of your list, along with what the upkeep in fees and paperwork is going to be. My dad formed an LLC last year and was sort of irritated to find that he had to file an annual report with his state.
posted by averyoldworld at 6:26 AM on August 16, 2007
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posted by essexjan at 8:36 AM on August 15, 2007