There's a lot of room for personal and professional creativity when choosing a business name, but there are three main considerations to keep in mind:
Trademark law will prevent another business from using a name or logo that is likely to be confused with your business name if your business name is entitled to trademark protection. If your business is anything but a small, local service or retail business, such as a dry cleaners or a fabric store, you'll probably want to take advantage of this.
Allowing businesses to have exclusive use of their names helps consumers identify and recognize goods in the marketplace. For instance, when you buy Racafrax brand of wood glue, you'll know that it will be similar in quality to the Racafrax glue you bought last time. By contrast, if any company were allowed to call their glue "Racafrax Glue," you would never know what you were getting. By allowing just one company to use a name like Racafrax, trademark law helps that company to build customer trust and goodwill.
Any business name used to market and identify products or services is a trademark. For example, McDonald's uses its business name to market its hamburgers. But to qualify for trademark protection under the trademark laws, your business name should be what trademark law considers distinctive.
Distinctive business names (such as Xerox, Quicken, and Amazon.com) are clever and memorable, and they usually receive protection under federal and state trademark law. Common or ordinary names (such as Smith's Hardware, Tom's Gourmet Sandwiches, and Pets.com) usually do not.
While there's no magic formula for concocting distinctive business names, they tend to be made up of surprising or fanciful words that often have nothing to do with the underlying business, product, or service, such as Kodak film or Double Rainbow ice cream. However, there can be a downside to coining a brand new word or using a completely arbitrary term. Business names that have nothing to do with the underlying product or service often require extensive and expensive marketing efforts to become established.
The best names for small businesses are those that customers can easily remember and associate with your business. For this reason, many small businesses prefer to use words that cleverly suggest qualities about the underlying product or service without describing them outright, such as Lending Tree for loans, Slenderella for diet food products, or The Body Shop for personal hygiene products. These names are also considered distinctive and are therefore protected as trademarks.
For more information on general trademark law, see Nolo's articles on Trademarks.
Here are a few more guidelines to use in your search for a distinctive business name:
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