Assumed Names vs. Legal Business Names In Healthcare
What is an assumed name, and does it matter from a legal standpoint? The answer is a resounding “yes.”
An assumed name is any name your business uses other than its legal name. Individual states refer to assumed names in different ways, such as “fictitious name” or “doing business as” (sometimes written as “DBA”).
Assumed Names vs. Legal Business Names
An assumed name is separate and distinct from the legal business name listed on your initial business filing. Legal business names follow strict naming requirements based on the entity type. Limited liability companies typically must list the designation, such as “LLC,” after the business name. Corporations usually require designations such as “Corp.” or “Inc.”
These naming requirements exist to put the public on notice. For instance, the LLC designation signals that a person is interacting with a business with limited liability protections, rather than with an individual in their personal capacity. Meanwhile, professional limited liability companies generally require a PLLC designation. The designation alerts the public that the business delivers a licensed professional service. To better understand the difference between an LLC and a PLLC, check out this blog.
Unlike legal business names, assumed names usually do not require an entity designation. This opens up broader naming options. For example, let’s say you choose the name “Best Practice Ever PLLC” when filing your professional limited liability company with the state. That is your legal name. Note: the state has not authorized you to use the name “Best Practice Ever.” If you want to use the name “Best Practice Ever,” you must file an assumed name application with the proper state authority.
Why Obtain an Assumed Name?
Filing an assumed name application makes sense in several different contexts. As discussed above, it permits you to drop the designation behind the legal name for ease of use and streamlined branding. Assumed names also make it possible to rebrand your business entirely while keeping all other contracts and business accounts in place.
Some states allow businesses to file multiple assumed names at the same time. This could benefit a practice with various disciplines that provide different services. For example, say your legal name is “Epic Medical Services PLLC.” In some states, you may operate under multiple assumed names such as “Epic Physical Therapy,” “Epic Speech Therapy,” and “Epic Yoga.”
The consequences of using a name that is not properly filed with the state can be severe. Some states have provisions in their statutes that impose monetary penalties on those using an unfiled business name.
But remember: it’s still essential to use your legal business name (e.g., “Best Practice Ever LLC”) when entering into business agreements. If you fail to disclose your business entity accurately as part of a contract, you could become personally liable. In other words, using a business name that you are not authorized to use (e.g., “Best Practice Ever”) could put your personal assets at risk instead of business assets.
Assumed Names For Healthcare Practices
Requirements for filing an assumed name application vary widely from state to state. The rules may depend on the type of entity (i.e., LLC, corporation, sole proprietorship, etc.) and they can vary based on the business’s services. Notably, in some states, healthcare professionals providing licensed services through their professional entity must file assumed name applications through state licensing agencies specific to the profession.
For example, to file a fictitious name permit for a medical corporation in California, you must file with the state’s medical board — not the county clerk’s office as you would for other non-professional entities in California.
Many state licensing boards have strict naming requirements for both legal and assumed names. Some states mandate that businesses list the profession or service as part of the name (e.g., “Best Physical Therapy Practice Ever PLLC) or the licensed professional’s full name.
Why is this important? If you fail to follow the business name requirements for your practice area, not only are you looking at financial consequences by failing to comply with state statutes, but you also risk disciplinary action from a licensing agency.
Legal Support For Naming Your Business
As discussed, assumed name requirements vary greatly depending on your state, entity type, and even your profession. Business owners performing licensed health care services often face stricter requirements than other businesses. Thus, we recommend that you work with an experienced healthcare attorney to ensure your name is compliant with the state regulations governing your profession. The health care attorneys at Jackson LLP want to help you oversee a successful practice or business. If you operate in one of the states where we have licensed attorneys, book a free consultation to determine if we fit your needs.
This blog is made for educational purposes and is not intended to be specific legal advice to any particular person. It does not create an attorney-client relationship between our firm and the reader and should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.