3 Tips for Choosing a Name for Your New Healthcare LLC or Corporation
Fixing a business name that doesn’t comply with your state’s requirements can be costly. Save yourself the headache and take the time to get it right.
A name is fundamental to the identity of your healthcare practice or business. Many business owners consider naming the business an exciting step. Despite this, the process of choosing a name is not always as straightforward as one might hope.
Naming a business entity typically involves working with the Secretary of State’s office or other state government body. Thus, naming procedures vary. Some states have detailed requirements, while others are more relaxed. So, before choosing a name, here are three tips to consider.
1. Be sure nobody else is using that business name.
If your practice or business is a limited liability company (LLC), corporation, or other legal entity, your business name needs to be “distinguishable upon the records of the Secretary of State.” Simply put, you need a name that is unique. When registering a business name, the state will look for other business names that are similar enough to create confusion for consumers. In many states, such as Illinois, you can search the Secretary of State’s website to determine what names other businesses have already claimed.
2. Comply with your practice act and ethical rules.
Business naming regulations may vary slightly across professions. However, as a general rule, licensed healthcare professionals cannot choose names that contain superlatives or verbiage that guarantees a particular result. For example, names such as “Chicago’s Best Physical Therapists, LLC” and “Cure for Cancer, LLC” are unacceptable.
Additionally, some states, such as New York, have an extensive list of restricted words. These restricted words either require special permission from the state to be used (like “education”) or cannot be used in a business name at all (like “cooperative”). Other states, such as Illinois, have a very short list of restricted words, prohibiting only words such as “bank,” “banking,” and “insurance.”
3. Include the proper notation for your corporate formation to reflect your entity type.
Your business name must include an indicator of its corporate form, and that indicator must be distinct from the other words in the business name. For example, LLCs must contain the term “Limited Liability Company,” “L.L.C.,” or “LLC.”
An LLC cannot contain any of the following:
- Limited Partnership
In this same vein, corporations must contain “Corporation,” “Incorporated,” “Company,” “Limited,” or the abbreviation of one of these terms.
An aside: not all healthcare providers can form standard corporations. Many states, such as Illinois, have adopted special rules for businesses that provide professional services, including healthcare. Notably, these special rules often include a requirement to form as a professional limited liability Company (PLLC) or professional corporation (PC). We recommend that you consult with an attorney (and not your accountant) to determine the corporate entity that best suits your needs and fulfills your state’s requirements.
Note that states can be very finicky about how the corporate entity is listed. The Illinois Professional Corporation Act, for example, specifies that professional corporations may use the abbreviations “Prof. Corp.” or “P.C.” Meanwhile, we’ve seen the Secretary of State’s office reject applications that use “PC” (with no periods) in the name. Conclusion: It’s always best to understand and adhere closely to the rules for your state.
Aside from the requirement to include a notation of your corporate form in your legal name, it’s also good practice to highlight your limited liability status when conducting business. After all, shielding yourself from personal liability was one of the reasons you created your LLC or corporation. Thus, including your corporate form in your name puts prospective and existing clients on notice that you’re operating as a limited liability entity.
Choosing a name for your business is important, and the applicable state laws and regulations can quickly turn a fun process into a frustrating one. It can be costly to fix a business name that does not comply with the standards imposed by the state and your profession. At a minimum, you’ll need to amend state paperwork, reprint marketing materials, and update your website. To save yourself much aggravation, take the time to get it right from the outset.
The healthcare attorneys at Jackson LLP can help you avoid these headaches. If you’re in one of the states where we are licensed, we can provide startup services, including entity formations. For more established practices, we provide advertising review services to audit your existing marketing. Our free consultation will help you determine if we’re the right firm for you, so reach out to us today.
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. It should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.