If a business name is inactive, you can use such a name if you choose to. When a business name is inactive, the name does not legally belong to any business. For a business name to remain active, the business must meet the requirements that will make the corporate affairs department keep the name active.
Once you come across a business name you like and the business is no longer active, you are expected to run a search on the name online to ensure that the name is available. If the name is available, then you can legally go ahead to tie down the name for your business.
Please note that the only reason why you may not be able to use an inactive business name is if the business name is under trademark or if the business in question still has pending legal issues.
Of course, no one would want to name their business after a business that went down because of bad publicity. That is the reason why you should conduct your due diligence before picking an inactive business name. No one wants to carry the baggage and controversies of a business that went under.
Why Do Business Names Become Inactive?
The reasons why business names become inactive are not far-fetched. Firstly, business names become inactive when the business owner is not able to meet up with the business renewal requirements in their country or state.
Trust me, even though the requirements for renewing business registration are not tedious and cumbersome, there are always lazy entrepreneurs who don’t have the time to pay the required fees and taxes, and submit the required documents so that their business can remain active.
Another reason why a business name can become inactive is when there are disputes among the founders of the business, and they decide to dissolve the business and go their separate ways.
With that, the business will remain inactive and perhaps there might be a court ruling that may prevent any of the founding members of the business to use the business name. Of course, if the business name is not a trademark, anyone else can go ahead to use the name.
Aside from the reasons stated above, there are other reasons why a business may decide to abandon its business name and make it inactive.
It could be because of a merger and acquisition where the new owner of the business may decide not to make use of the old name. It could be that the business what to rebrand and restructure hence they may decide not to use the old business name and then allow the name to become inactive.
It could even be that a business may just want to change its business name for obvious reasons. The bottom line is that a business name can become inactive for several reasons.
Pros and Cons of Using a Business Name That is Inactive
The major advantage of using a business name is to leverage the goodwill and brand recognition of the business. This is applicable if for example, the owner of the business decided to sell off the business, and the new owner of the business chooses not to continue with the old name.
Another advantage of using a business name that is inactive is that you may likely find it easier to scale through bottlenecks and huddles when you want to obtain business licenses and permits in your county, city, or state. This is so because most of the officials you will come across may think that it is the same owners that want to reactivate the business hence you may get easy access.
The major disadvantage when it comes to using a business name that is inactive for your business is that most customers or potential customers may think that it is the same business or management that is still running the business.
As a matter of fact, you may have to spend more to convince your target market that it is a new business under new management. This is applicable if the old business went under in a controversial manner.
Another reason why you should not use a business name that is inactive is that you may have to contend with trademark issues. This is applicable if the business in question trademarked the business name. Please note that a business name can become inactive and available whereas the trademark for the business name will still be very much active.
In as much as entrepreneurs may decide to choose a business name that is inactive, it is advisable to conduct your due diligence before settling for an inactive business name. The only reason why we will recommend this for an entrepreneur is where the advantage of doing so far outweighs the disadvantages.