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May 21, 2014

What's in a Name? Considerations for new Business Owners.

Starting a new business is an exciting endeavour. Combining the right product, idea, or service with the proper marketing techniques and brand management can enable an entrepreneur to differentiate his or her business very quickly. A crucial element of brand management is selecting the perfect business name and equally important is to ensure that the selection and use of the name complies with the law. To demonstrate an understanding of Ontario law in this regard, consider the application of the law to a fictional new business specializing in customized jewellery created by our fictional owner, Sally. Sally wants to market her business with the name Jewel Magic.

Sally is most likely to begin her business, Jewel Magic, as a sole proprietorship. She will need to comply with the Business Names Act (BNA), which sets out specific restrictions on the use of a business name. In particular, s. 2(2) of the BNA sets out that an individual cannot carry on business or identify his or her business to the public under a name other than his or her own name, unless the name is registered by that individual. This registration is completed with the Ontario Ministry of Government Services and is valid for up to 5 years. The BNA also requires, as set out in s. 2(6) that a person carrying on a business under a registered name must set out both the registered name and the person’s name in all contracts, invoices, negotiable instruments and orders involving goods or services issued or made by the person. For example, when Sally orders supplies and crafts for her business, she must provide both her name and the name Jewel Magic on the order. Choosing not to register the business name can have consequences under the BNA, the greatest of which is that Sally would not be allowed to pursue a claim or defend her business against potentials claims in an Ontario court, as specified in s. 7(1).

As the business becomes more successful, Sally may consider incorporating her business and in doing so, additional name restrictions will apply pursuant to the Ontario Business Corporations Act (OBCA). In particular, and as per s. 10(1), one of the following legal endings will need to be added to the business name: Limited, Limitée, Incorporated, Incorporée or Corporation or the corresponding abbreviations Ltd., Ltée, Inc. or Corp. The name cannot be too general or similar to already incorporated or registered names (unless it is affiliated with those incorporations or businesses). As Sally designs and sells jewellery although she doesn’t manufacture the jewellery, she may consider choosing a more specific corporate name such as Jewel Magic Design and Sales Inc. Sally’s corporate name cannot contain certain prohibited words as specified in the regulations to both the Acts, for example: names that suggest a connection with the federal, provincial, or municipal levels of government, an agency of the government, and names including the use of the word college or university. Similar to the requirement set out in the BNA, s. 10(5) of the OBCA requires that the corporate name must be set out legibly in all contracts, invoices, negotiable instruments and orders involving goods or services issued or made by the corporation. As the corporation is only authorized to the use of its registered name, it is important to use the corporate name exactly as set out in the Articles of Incorporation, with no abbreviations (except to the legal ending) and no additional punctuation that isn’t already part of the corporate name.

Since Sally has expended quite a bit of energy and finances in marketing the name Jewel Magic, she’d like to continue using that in certain situations for the Corporation, particularly for marketing campaigns. In order to permit the Corporation to continue to use this business style, Sally will need to first cancel her initial registration as a sole proprietorship with the Ontario Ministry of Government Services and re-register the name Jewel Magic as a business style name for her corporation. As previously explained, this would enable her to use the name for a 5-year period as per s. 2(6) of the BNA. Sally would also need to ensure that she sets out both her corporate name and her business style in all contracts, etc. For example: Jewel Magic Design and Sales Inc. o/a Jewel Magic or Jewel Magic, a division of Jewel Magic Design and Sales Inc.

Consider that Sally’s business is so successful that she decides to open up several stores. Several marketing efforts may be involved in promoting the new stores and to further protect her name, Sally can also register her business name Jewel Magic as a trade-mark. Doing so would not only serve to protect the business name as evidence of ownership, but would also ensure that Sally has exclusive rights to the use of the trade-mark all across Canada for 15 years, should she decide to pursue nationwide expansion. It should be noted that there will be additional restrictions that will apply to the registration of the name as a trade-mark and Sally will need to ensure that the name complies with the Trademarks Act and accompanying regulations.

If you are a new business owner, you should carefully consider the requirements and restrictions surrounding the selection and use of your new business name so that you are not faced with unnecessary obstacles on the way to success. Proper planning can ensure that you are able to use your business name to maximize its marketing potential.

* Thank you to Olu Muili, Corporate Law Clerk, for her assistance with this article.

Photography by Jansen Chua