Selling a Business Name: Everything You Need to Know
Selling a business name is necessary when transferring or selling your company to another party.3 min read
Updated November 2, 2020:
Selling a business name is necessary when transferring or selling your company to another party. While owners do have the option of maintaining ownership of the name of the business, if it has been decided that the business name will be transferred, then there are many things that need to be considered.
Do You Own Your Business Name?
In order to comply with state law, most small-business owners will register the name with their state. Generally, the process of registering a company name will ensure that no one else can utilize the same name to sell comparable services or goods. However, protection may not extend nationwide. If another party has previously registered your desired name with the state to sell similar services or goods, then most likely your registration will be denied. In addition to registering with the state, you must also use a trademark in order for the goods and services to be considered under your ownership.
How to Sell a Business Name
A business name can be a company's greatest asset. It serves as a symbol of expertise, customer service, and company identity. Rarely do individuals just want to buy the name of a business. Generally, transferring a company from one party to another will consist of selling both the business and its name. When a person seeks only to purchase a business name, it generally occurs for the following reasons:
- The name has significant importance to the individual attempting to buy it.
- The reputation associated with the name is valued or unusually marketable.
Typically, the most common occurrence of a business name purchase will involve a website domain name, especially those that potentially can encourage a significant number of page hits.
There are certain steps to take when selling a business name.
- Determine if a business with a similar name exists: Selling a company name that may be mistaken for another business may be more difficult. This may also occur even if the other business is in a completely different industry. The more unique the company name, the easier it will be to sell it. The value of a company name is reduced when multiple businesses have the same name.
- Establish the right to sell the company's name: When a business is named after the owner and only the owner, then that individual has direct ownership of the name. For example, consider the business name of “Kevin Comstock Farms.” However, if the business name is not trademarked, then it is not protected by law without authority to sell it. To clarify, this means unless the business name is protected under local, state, or federal law, a business owner has no authority to sell it and gain a financial profit.
- Prove the validity of the business name: In order to prove a name's validity, there are many angles to consider. Some potential buyers may view a trademarked name to hold more value, while others may be more concerned with a name's reputation. Some future owners may value the longevity of a name. Justifying the validity of a name can be difficult because the marketing goals of each potential buyer may be different.
- Remember, shorter domain names are better: Shorter business names are easier for customers to remember and to associate with the related goods or services. Business names that are hyphenated, long, or difficult to spell and pronounce are less attention-grabbing and harder to sell.
Remove obstacles associated with the business name: No potential buyer wants to purchase the previous owner's problems. Remove any obstacles before attempting to sell a business name. Potential obstacles may include:
- Accumulated business debt.
- Lawsuit involvement.
- Tax liens.
- Set the dollar amount for the name of the business: Determining a realistic dollar amount can be very subjective. There are many factors to consider when establishing a name‘s value. Remember, any issues attached to the name of a business will significantly hurt the dollar value.
- Be prepared to negotiate: The majority of buyers will not pay top asking price for a business name, even one with significant value. Be prepared to disclose the minimum amount that you will accept to a potential buyer.
If you need help with selling a business name, you can post your job on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.