Although we see individuals and sole proprietors conduct business every day under names which are not their own, few of us stop to think about the ramifications of carrying out business under assumed names. If you conduct business with a person using a name not her own, or if you are thinking about conducting business using a name that is not your own, some caution is warranted. Pennsylvania law requires that the proprietor must inform the public in some way as to the identity of the person behind the business, and further requires that the trade name be registered with the Pennsylvania Department of State. This law is known as the Fictitious Names Act, and it can be found at 54 Pa.C.S.A. § 312, et seq.
As an example, Mr. Jones would like to open a second hand shop and wants to call it “Hidden Treasures.” Since the business is not going to be carried on under Mr. Jones’ proper name, Mr. Jones is required to register the name “Hidden Treasures.” The theory is that the public has a right to know with whom it is doing business. Thus, in Pennsylvania the obligation to register a fictitious name applies not only to individual persons but also to corporations. Businesses, like natural people, can conduct their operations under their proper names; but for a corporation, its proper name is the one set out in its articles of incorporation. ABC Corporation may trade under its own name without any registration beyond its articles of incorporation, but it may not trade under any other name unless it is registered. If Mr. Jones has a corporation named “Jones, Inc.” and the corporation intends to trade under the name “Hidden Treasures,” the corporation must register the fictitious name. Nonprofit and professional activities are specifically exempted.
There are many reasons why it is good policy to require that the fictitious name be registered. Registration allows the business’ customers and vendors to know exactly who is legally responsible in the event that there is a claim for goods, services, or payment. Although it is unpleasant to consider, there is always the possibility that a patron may suffer an injury and needs to know who is legally responsible. Perhaps the most important reason for most business owners to register is the penalty for failing to file a fictitious name registration — the unregistered entity may not use the courts of Pennsylvania to enforce a contract entered into while using the unregistered fictitious name. Failure to file may also subject the business owner to a civil penalty of up to $500.00, which must be paid before the business can enforce its contracts.
Names are kept in a single registry with the Corporation Bureau of the Pennsylvania Department of State in Harrisburg. Anyone who wants to know the legal person or entity responsible for “Hidden Treasures” need only contact the Corporation Bureau to determine the name and legal address of the person or corporation responsible. In the Corporation Bureau’s central registry the fictitious names are indexed both by the name and by the street address so that the principal of the business is readily ascertainable. You can contact the Pennsylvania Corporation Bureau to perform records searches by calling 717.787.1057, or by writing to Department of State, Corporation Bureau, P.O. Box 8722, Harrisburg, PA 17105-8722. You can search the Corporation Bureau’s online database on the web at www.dos.state.pa.us/corps/.
It is important not to confuse a fictitious name registration with a trademark or copyright. Registration under the Pennsylvania Fictitious Names Act creates no legal right to the name. If Mr. Jones wants to trade using the name “Hidden Treasures” on Main Street, it does not preclude Mr. Smith from using the same name to conduct business on Elm Street. However, there are other ways for Mr. Jones to protect the name “Hidden Treasures.” That is, the name of his business may be protected with a trademark. Additionally, and, in many instances, even without formal trademark registration, Mr. Jones may be able to bring a lawsuit to stop any unfair business practice, such as stealing the name “Hidden Treasures.” Indeed, quick action is often essential to preserving the right of a business to use a particular name.
Although registration under the Fictitious Names Act may, in the end, seem like one link in a long chain of bureaucratic red tape to most small business owners, compliance with the law not only provides the benefits of being a legitimate business, but also the personal satisfaction of being “above board.” It can also help a business establish the date on which it first began using the name, providing potentially valuable evidence in the event of a later dispute over the right to use of the particular name. As always, sound legal advice is paramount in deciding how best to protect yourself when trading under an assumed name, so it is important to talk with your lawyer before conducting business under a name that is not your own.