If you are considering electing S Corporation status you might wonder how this will impact your existing LLC or C Corporation. One question that comes to mind quickly is the continued ability to use LLC or Inc with a business name.
S Corporation election is a tax classification, it does not change a business’s legal structure. Limited Liability Companies and C Corporations that elect S Corp status remain the same underlying business entity and retain their legal business name.
Therefore, a Limited Liability Company may use “LLC” (or another limited liability company designator allowed by the state) if that abbreviation is part of the LLC’s legal name filed in its formation paperwork. The same is true for a C Corporation after electing S Corporation status. It may continue to use “Inc.” or another designator as filed in its articles of incorporation. If an LLC elects S Corporation status, it may not begin to use words that imply the business is formed as a corporation.
What Entity Identifier Rules Should You Be Aware of?
Each state has its own rules about the entity identifiers LLCs and C Corps may use in their names.
Common Limited Liability Company Designators
- Limited Liability Company
- LLC (or L.L.C.)
- LC (or L.C.)
Common Corporation Designators
What Business Name Restrictions Should You Be Aware of?
States prohibit words and abbreviations that will mislead the public by implying that a business is something it is not. Restricted terms vary by state, but I’ve listed some typical examples below.
- Designators that imply the company is a business entity other than what it is officially registered to be (e.g., An LLC may not use Inc. after its name, and a C Corporation may not use LLC after its name.)
- Apothecary (unless a licensed pharmacy)
- Insurer or Insurance
- Names that suggest a business is associated with a government entity or agency
- Names that imply the company is a city, borough, or another government unit
- Names that imply professional licensing (e.g., CPA, Architect, Engineer) when that licensing has not been obtained
Does a Designator Always Need to Be Included in an LLC’s or Corporation’s Business Name?
Most states require that an entity identifier be included in the business name filed in an LLC’s articles of organization or a corporation’s articles of incorporation. And it’s important for business owners to include their designator when using their company name on contracts, bank accounts, credit card accounts, marketing materials, and other documentation. Doing so makes it clear that the business is an official legal entity. Moreover, it helps demonstrate legal separation between the company and its owner, which is critical in the event a vendor, creditor, or customer brings legal action against the LLC or corporation. If the designator is omitted, courts could rule that the business owner personally entered into transactions (pierced the corporate veil) and is, therefore, personally liable for the business’s debts. Sadly, that shatters one of the most significant benefits of forming an LLC or incorporating a business, which is personal liability protection for the owners.
Which Designator Should You Choose?
That comes down to researching which entity identifiers your state allows and your preference for which one will best serve your company. When deciding on a business name, consider doing a name search to determine if the name you wish to use is available or already taken by another company. Also, it can be helpful to consult an attorney to verify business name availability and gain an understanding of your state’s rules regarding LLC and corporation designators.
Ready to Elect S Corp Status?
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