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14 December 2018Regulatory compliance for cryptocurrency businesses
How to perform a Delaware entity search
What is a Delaware entity search?
A Delaware entity search is used to look up a company name in Delaware and make sure the name isn’t already used by another company. However, before getting started, it is important to understand why businesses choose to incorporate in Delaware to begin with.
Delaware is the most popular state in the nation for forming a corporation. Why? Because Delaware’s corporation laws are written to provide a greater degree of flexibility to corporation founders in regard to the structuring of director and shareholder rights, the terms of a company’s classes of stock, and for investments, mergers, acquisitions and takeovers.
Investors also have a preference for Delaware corporations because of the friendliness, familiarity and depth of corporate legal history in Delaware law. Investors have confidence in the state’s courts and judges, who have decades of experience analyzing corporate issues and adjudicating business disputes. You can learn more about the advantages and disadvantages of incorporating in Delaware here.
Given the number of companies formed in Delaware, choosing and reserving the name of choice for your corporation can be challenging. There are, however, steps you can take to avoid common mistakes in naming your Delaware corporation.
How to search for a name
Searching for an entity name in Delaware is easy. You can conduct your own name search using The State of Delaware’s official General Information Name Search engine.
The process is simple:
- Type in your potential company name where indicated.
- The search engine will return a list of entities, both active and inactive, with exact or similar names to yours.
- You can then click on the individual entity names on the list. Entity information provided includes: entity name, file number, incorporation/formation date, and the registered agent’s name, address, phone number and residency.
Not included in the search is information on company business type, and whether or not your potential name is considered “available” under state law. You will, however, get a general sense of the number of possible conflicts you might face regarding your company name choice.
Required and prohibited elements of a corporate name
Delaware law states that corporation names must include certain elements and cannot include others:
- Corporation names must include one of the following words or terms: “corporation”, “company”, “club”, “foundation”, “association”, “fund”, “limited”, “incorporated”, “institute”, “syndicate”, “society”, “public benefit corporation”, or “union”.
- Abbreviations for above listed words and terms are also permissible. Examples include: “Inc.”, “Ltd.”, “Co.”, and “Corp.”
- Names cannot contain the following words without the prior approval of the Delaware Banking Commissioner (examples: “Bank” or “Trust”) or the Delaware Secretary of Education (examples: “University”, or “College”).
In addition, names cannot contain any words that may, in the judgment of the Delaware Secretary of State, be degrading, vulgar, or otherwise unacceptable.
Delaware also law requires that a new corporation’s name be “distinguishable” from the names of existing entities formed in the state as well as those entities formed in other states that are qualified to do business in Delaware as “foreign” entities. However, even slight variations in the name (for example, the addition of a Roman numeral or additional word) can qualify as “sufficiently distinguishable”.
How to reserve a name
A corporate name can be reserved with the Delaware Secretary of State for a fee of $75. The reservation can be completed online, or by faxing or mailing in a paper application. Application forms for each type of entity can be found here. Once your name is reserved, you have 120 days to form your corporation by filing a Certificate of Incorporation with the state.
Modifying your preferred name
Keep in mind that your first name choice may not be available, so your best tactic is to compile of a list of several possible names for your corporation. You’ll then need to search the online database for each name to determine those that are available. If your potential names aren’t available, you might consider modifying one of your favorites:
- Make one of the words plural by adding an “s.”
- Add an additional “generic” word related to your company’s industry. For example consider adding one of the following: “technology,” “telecom,” “industrial,” “precision” or “products.”
- Substitute a sound-alike or look-alike word for the word that conflicts with an existing entity’s name.
- Substitute whole words for initials (or vice versa).
However, the addition of “The” will not be sufficient, and changing the corporation signifier or abbreviation at the end will also not qualify. The database ignores these words.
Other common strategies for modifying a corporation’s name include:
- Consulting a thesaurus to find a synonym for the word causing the availability issue.
- Substituting a foreign language word for its English language counterpart.
Domain name and trademark issues
One mistake that many people make is failing to realize that clearance and reservation of a business name with the Delaware Secretary of State does not guarantee that the name is available as an Internet domain name, nor is it a guarantee that use of the name will not create trademark infringement issues.
Internet domain names can only be registered through ICANN-WHOIS using an authorized commercial registrar. There is no connection between the Delaware Secretary of State’s entity database and ICANN.
Similarly, your company’s new Delaware corporate name could be “confusingly similar” to the name of an existing business, its brand name, or the name of one of its products or services. This similarity could constitute trademark infringement once you begin using your name in the marketplace.
Before you spend the money reserving a Delaware name or on forming a Delaware corporation (or, for that matter, ordering business cards and stationery, investing in product packaging or website design,etc.) you’ll want to search the trademark database of the U.S. Patent and Trademark Office (USPTO) for possible conflicts (Trademark lawyers will recommend a standard trademark search as minimum due diligence. Standard searches cost between $100-500 and covers the USPTO database, state trademarks and domain names). The last thing you want, after investing in a company name, is to receive a cease and desist letter from an existing business demanding that you abandon your new name and threatening a trademark infringement suit. An experienced attorney knows how to read these reports and can help you figure out your risk exposure.
Because U.S. law confers rights on unregistered trademarks, you’ll also want to conduct Google and other internet searches on your potential business name. If an unregistered mark used by an existing business is similar to your new name, and that business is in the same or a similar industry (or sells similar products and services), you could be at risk of an infringement claim, even though the trademark is not registered with the USPTO. Remember, the costs of defending an infringement claim by an established company could be fatal to your brand new business.
Keep in mind that trademark infringement is determined by a different standard than corporate name availability. “Confusing similarity” regarding trademark law applies a different standard that that used for approving corporate name. Trademark infringement law takes into account how consumers of the relevant products and services will perceive conflicting names in the marketplace. For example, while the addition of an “s” or Roman numeral, or the substitution of a foreign language word, in your business name may suffice when seeking approval of that name by the Delaware Secretary of State, it will generally not suffice when it comes to avoiding a trademark infringement claim.
As you can see, issues regarding business names and trademark infringement can be confusing, serious and expensive. If your USPTO or internet searches are revealing potential trademark problems, be sure to consult an experienced trademark attorney.
Written by Andrew Lachman