Can I use Inc. In Business Name without first being incorporated? (CA)

[krdale01]

Jurisdiction

California

My colleague started a production company business using part of his name and adding the "INC" designation to the end of the business name without first becoming incorporated. Is that legal to do so even if he operates as a sole proprietorship or LLC? Or does he have to remove it? It's really just for marketing the brand until he gets bigger and can fully incorporate. Thanks in advance!

 

[adjusterjack]

Not only is it probably illegal, which would subject him to being fined by the state, but your friend is committing fraud against his customers as they are relying on him being something he is not. And that could get him personally sued or, worse, criminally prosecuted.

 

[krdale01]

Not only is it probably illegal, which would subject him to being fined by the state, but your friend is committing fraud against his customers as they are relying on him being something he is not. And that could get him personally sued or, worse, criminally prosecuted.

What law states that it's illegal? Of course, anyone can get sued for anything. He is worried about this and for the time being has said he'll say the INC stands for "in charge" however he wants to know if he should just drop the whole INC until it's official.

 

[army judge]

What law states that it's illegal? Of course, anyone can get sued for anything. He is worried about this and for the time being has said he'll say the INC stands for "in charge" however he wants to know if he should just drop the whole INC until it's official.

Think about Acme, Inc for a minute.

Acme, Inc. ALONE should imply nothing to a potential customer.

Potential clients or customers should ALWAYS perform their "due diligence" before spending money or retaining any entity to do work on their behalf.

To paraphrase the Bard, "A name is a name."
A reputation is more than a name.

Your friend could use names that imply strength and honesty without using Inc.

Acme Organization

Acme Enterprises

Acme Associates

Acme Entity

ETC....

 

[adjusterjack]

What law states that it's illegal?

Here are some excerpts from the CA Corporations Code:

162. "Corporation", unless otherwise expressly provided, refers only to a corporation organized under this division or a corporation subject to this division under the provisions of subdivision (a) of Section 102.

209. For all purposes other than an action in the nature of quo warranto, a copy of the articles of a corporation duly certified by the Secretary of State is conclusive evidence of the formation of the corporation and prima facie evidence of its corporate existence.

2207. (a) A corporation is liable for a civil penalty in an amount not exceeding one million dollars ($1,000,000) if the corporation does both of the following:

(1) Has actual knowledge that an officer, director, manager, or agent of the corporation does any of the following:

(C) Misstates or conceals, or has misstated or concealed, from a regulatory body a material fact in order to deceive a regulatory body to avoid a statutory or regulatory duty, or to avoid a statutory or regulatory limit or prohibition.

Those sections can be construed as saying you can't use INC without being incorporated.

I wouldn't want to be in front of a judge defending that use with $1,000,000 at stake.

He is worried about this and for the time being has said he'll say the INC stands for "in charge" however he wants to know if he should just drop the whole INC until it's official.

Yeah, he should drop the INC until it's official.

 

[zddoodah]

My colleague started a production company business using part of his name and adding the "INC" designation to the end of the business name without first becoming incorporated. Is that legal to do so even if he operates as a sole proprietorship or LLC?

It's possible that there's some obscure provision in the California Corporations Code that makes it illegal to use "Inc." or "Corporation" in a business name if the business is not a corporation. I doubt it amounts to anything, however. The more likely issue would be if someone were misled into believing "ABC, Inc." is a corporation and suffered damages as a result. That seems pretty unlikely, but maybe.

It's really just for marketing the brand until he gets bigger and can fully incorporate.

What does this mean? Is he actively seeking to deceive people? Also, there's no such thing as "fully incorporate." The company either is incorporated or it isn't.

By the way, Corporations Code section 2207 has nothing to do with this issue.