The coronavirus pandemic changed the small business landscape. The resulting economic crisis may have small business owners rethinking strategy to reconnect with current customers or reach new ones. One tactic that can make a difference is a business name change to better reflect your brand. Here’s what you need to know to help you make this big decision.
Reasons to change your small business name
Established companies make name changes to help them rebuild their brand and attract new business. Here are three main reasons:
The name no longer represents what your business does
Have your products or services evolved? Starbucks officially changed its original name of “Starbucks Coffee, Tea and Spices” in 1987. In 2011, the brand dropped “coffee” from its logo signaling an expanding menu.
A name change might also be in order if your business model shifts entirely. As an example, let’s say you started your business as a consultancy, but you now only sell software. In that case, it’s probably time to drop the name “Jones Consulting” and rebrand yourself with a snazzy software name instead.
The brand has become stagnant
Does your name not represent the value of your business? Coach, the upscale handbags company, is now going by Tapestry Inc. to embrace the other luxury brands under its umbrella, like shoes and accessories.
The business has experienced controversy that tarnishes its name
Remember the Washington Redskins football team? The controversial name referred to the skin color of Native Americans, often used in a derogatory way throughout history. As of 2020, the team has not settled on a replacement.
For trademark or legal reasons
As long as no one else in your state is using that business name, you can call your company whatever you like. However, as brands are usually nationwide these days, you can run into trademark issues if your business and another's are in the same industry or are substantially similar.
You’ve acquired another company or merged with another entity
Acquiring another company or merging with another entity is a significant change, and many business owners want to change the name of the new, larger company to reflect that. You can merge the two names, choose to keep only one name, or select something else altogether.
You have a name that’s no longer accurate to your business
What “accurate” means in this context is up to you. If anything about your company’s name feels untrue to what you do, then it’s time to change your business name. The good news is that, with the below steps, doing so can be a relatively straightforward process.
Steps to changing your business name
Take the following steps to change your business name:
1. Research your new business name
To avoid running into trademark or other legal issues, do your research. What you think might be a one-of-a-kind name may actually be taken by another business. Find a unique name that fits with your current brand or new offerings.
2. Conduct a business name availability search
In most states, the website of the state business filing agency includes an entity name check tool so you can search business names and find out whether another business is already using the name you have chosen.
3. Notify the IRS of your new name
The official IRS website lists the steps you must take to be in name change compliance. This process differs based on whether your company is a partnership, LLC, or corporation. It’s also different if you’re a sole proprietor. If your company is an LLC, follow the directions for whichever business type the IRS designates your company as (LLCs are only recognized at the state level).
The directions are as follows:
- Sole Proprietorship. Write to the IRS at the address where you filed your return, informing the Internal Revenue Service (IRS) of the name change. The notification must be signed by the business owner or authorized representative.
- Partnership. If you are filing a current year Form 1065, mark the appropriate name change box on the form: Page 1, Line G, Box 3. If you have already filed your return for the current year, write to the IRS at the address where you filed your return to inform us of the name change. This notification must be signed by a partner of the business.
- Corporation. If you are filing a current year return, mark the appropriate name change box of the Form 1120 type you are using:
- Form 1120: Page 1, Line E, Box 3
- Form 1120-S: Page 1, Line H, Box 2
- If you have already filed your return for the current year, write to the IRS at the address where you filed your return to inform the IRS of the name change.
- In addition, the notification must be signed by a corporate officer.
4. Notify the Secretary of State
Each state’s office has a process for a business name change. States have different names for the form you must complete. Go to USA.gov to find a link to your state’s office. There will likely be a fee for the name change.
5. Determine if you need a new DBA or EIN
According to the IRS, businesses need a new EIN when their ownership or structure has changed. Although changing the name of your business does not require you to obtain a new EIN, you may wish to visit the Business Name Change page to find out what actions are required if you change the name of your business.
In the US, each business is required to have an EIN. This number is unique to your business and is issued by the federal government. An EIN is used by the IRS in order to quickly and easily identify each business for tax purposes.
If you do choose to apply for a new EIN, head to the IRS’s application page to get started. In your application, you’ll need to indicate your company’s federal tax structure and your business partners. You should also explain that you’re requesting a new EIN due to a change in your business name. Then, add your contact information, list your company’s legal and trade names, indicate any applicable excise taxes, and describe your operations.
Separately from an EIN, a DBA (doing business as) allows a business to operate under a different name than its legal name. Read more via the SmartBiz Loans Blog How Much Is a DBA: Your Complete Guide.
6. Update your licenses and permits
Although a business name change doesn’t require you to reapply for all your business permits and licenses, it does merit a name change on all these documents. To make this change, contact the authority responsible for each permit or license and request a name change. The process will be easy, but each change may come with a fee.
7. Update your internal business documents
Internal documents such as employee handbooks, job contracts, and the like should also be changed to reflect your new name. Although this step can be time-consuming, it doesn’t come with the fees involved in updating your external documents. It’s also an important step for unifying your branding across all fronts and getting your team fully on board with your name change.
8. Spread the word
Once you’ve gone through the proper channels to change your name, take the next obvious steps – to reintroduce your brand to customers far and wide.
- Use social media. A thrifty way to announce your name change is to embrace your social media channels. Take time to explain why this is the right time for a rebrand with a video, infographic, or clearly written post. Have a party to celebrate the name change with valuable clients, partners and associates. The important thing is ensuring that everybody understands why you’ve made the change, and sees it as a part of your ongoing business story.
- Use email marketing. The clearly written post you’ll share on social media also fits great in an email to your customer base. Load the post’s copy into a draft in your email marketing platform, then make the email look aesthetically pleasing. Then, schedule the email to go out at the same time as your social media announcements. With this double-pronged approach, you’ll make sure that virtually everyone who knows your business learns about your new identity.
- Update your website. Your business website is your best branding tool - a template for everything you do online. From logos and colors to tone and structure make sure it reflects you. That means it’s up to you to make a statement of intent and personality and that statement needs to be prominently featured on your website.
- Refresh marketing materials. Use marketing materials, like flyers, logos, business cards, and signage , to introduce or solidify your brand. For small businesses, there are many benefits of custom marketing materials and how they play into long-term business success. These pieces play an important role in creating notoriety in your industry.
What does it cost to change a business name?
The below costs usually emerge when you change your business name:
- Filing fees. There will usually be a filing fee associated with your name change that can range from $20 to $150, depending on your state. Updating your brand on and offline can come with increased marketing costs. Revisit your business plan to account for these costs and use a solid strategy to set a budget. If you don’t have a business plan in place, take the steps outlined in this SmartBiz Loans blog post: The Ultimate Guide to Starting a Business Plan.
- Trademarks, copyright, and patent change fees. Any intellectual property (IP) your business holds in its old name isn’t exactly accurate. The thing is, changing your IP isn’t free. Fees may be less than $100 or stretch into the triple digits.
- Fees for help modifying legal documents and contracts. In theory, you could handle all changes to your legal documents and contracts by yourself. However, it’s best to bring in a lawyer to oversee the process. Of course, lawyer fees can quickly pile up if your work takes a while. You could be looking at another several hundred dollars in attorney’s fees.
- Costs incurred changing your website and marketing materials. In some cases, changes to your website and marketing materials will be baked into the ongoing fees you pay for your web hosting or marketing services. However, if you’re not currently in contract with your providers, starting a new agreement to make these changes will likely require you to pay.
- The time spent changing internal documents. When you’re determining whether to change your business name, think about resources other than money. The substantial amount of time your team loses to modifying internal documents could be spent on client-facing matters – in business, time truly is money. If you’d rather preserve what you have, do what you can to feel content with your name. Chances are your clients won’t go anywhere.