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The Notice
Requirements of Business
Entities Operating as D/B/A's
Many business entities, whether they be corporations,
partnerships, limited liability companies (LLC), or sole proprietorships,
often do business under another name. For example,"X d/bYa
Y," where "X" is the business entity, and "Y"
is the name the public is familiar with. In such situations, because
the public is not aware of "X", one may be misled about
whom they are dealing with. For instance, one may extend credit
to "Y," assuming the owner will be personally liable
for the debt, only to discover that the true owner, "X",
is a corporation or LLC against whom personal liability does not
lie. This can create problems for the unwary.
This is so, because of the general legal rules
applying to business entities employing the d/b/a designation.
The designation is "merely descriptive of the person or corporation
who does business under some other name." Pinkerton's,
Inc. v. Superior Court, 49 Cal. App.4th 13421 57 Cal. Rptr.2d
356, 360 (1996)(quoting Providence Washington Ins. CO. v. Valley
Forge Ina. Co., 42 Cal. App.4th 1194, 1200, 50 Cal. Rptr.2d
192, 194 (1996)). The "[u]se of a fictitious business name
does not create a separate legal entity." Pinkerton's,
supra, 57 Cal. Rptr.2d at 360. This is the general rule throughout
the country. See, e.g., Wood Manufacturing Co. v. Schultz,
613 F. Supp. 878 (W.D. Ark. 1985); American Express Travel
Related Services Co. v. Berlye, 202 Ga. App. 358, 414 S.E.2d
499 (1992); Krawfish Kitchen Restaurant,:Inc. v. Ardoin, 396
So. 2d 990 (La. App. 1981); Jaffe v. Nocera, 493 A.2d 1003
(D.C. App. 1985); Arizona v. Ivanhoe, 165 Ariz. 272, 798
P.2d 410 (1990); Patterson v. V&M Auto Body, 63 Ohio
St.3d 573, 589 N.E.2d 1306 (1992); Rink v. NPN Inc., 419
N.W.2d 194 (N.D. 1988); Thomas v. Colyin, 592 P.2d 982
(Okla. App. 1979); Vernon v. Schuster, 179 Ill.2d 338,
688 N.E.2d 1172 (1997). Thus, when one deals with the publicly
known d/b/a, they are really dealing with the business entity
behind it.
The question, then, is whether the d/b/a has a
duty to inform those dealing with it of the true nature of their
business structure. At common law, the answer was "no."
In the absence of a statute, courts will not require d/b/a's to
put people on notice as to their true "identity." See
Roeckl v. F.D.I.C., 885 P.2d 1067 (Alas. 1994); Telex Corp.
v. Hamilton, 576 P.2d 767 (Okla. 1978).
To remedy this situation, many state legislatures
created "fictitious name statutes," under which entities
doing business under other names are required to file with the
state or county, informing them of this fact. Typical of the statutes
is Nevada Revised Statutes (NRS) chapter 602. NRS 602.010(1) reads:
Every person doing business in this state under
an assumed or fictitious name which does not show the real name
of each person who owns an interest in the business, must file
with the county clerk of each county in which the business is
being conducted, a certificate containing the information required
by NRS 602.020.
Under this statute, "doing business'' does
hot include isolated business transactions. See E1 Ranco, Inc.
v. First Nat'l Bank of Nevada, 406 F.2d 1205 (9th Cir. 1968).
Under NRS 602.020(1), "[t]he certificate must state the assumed
or fictitious name under which the business is being conducted
or is intended to be conducted," and the nature of the entity
which controls the fictitious business name. This "certificate
must be filed no later than 1 month after the commencement of
business under an assumed or fictitious name." NRS 602.030.
To avoid confusion:
No person may adopt any fictitious name which
includes 'Corporation,' 'Corp.,' 'Incorporated,' or 'Inc.' in
its title, unless that person is a corporation organized or
qualified to do business pursuant to the laws of this state.
NRS 602.017(1).
NRS 602.050 is the key to chapter 602, NRS:
Every county clerk shall keep, in alphabetical
order, in a book or other suitable index provided for that purpose:
1. A register of all the names
of the corporations, businesses, or fanciful or fictitious designations,
as shown in the certificates.
2. Unless it is a corporation,
the name of each person shown to be interested in or a partner
in such a business.
If one fails to file a certificate
as required by chapter 602, NRS, they are barred from commencing
or maintaining any lawsuit connected to the business, NRS 602.070,
and they are guilty of a misdemeanor. NRS 602.090.
This statutory scheme imposes a duty which the
common law did not. As the Nevada Supreme Court has stated:
Fictitious name statutes are generally enacted
to prevent fraud and to give the public information about those
entities with which they conduct business.
Brad Assocs, v. Nevada Federal Fin. Corp.,
109 Nev. 145, 148, 848 P.2d 1064 (1993). However, this "notice" requirement only provides information to those who bother to inspect
the records of the county clerk. There is still no duty imposed
upon d/b/a's to personally inform those with whom it conducts
business of the true nature of the business entity behind it.
Many states have similar statutory schemes. See,
e.g., Cal. Bus. and Prof. Code §§ 17900-930, which is entitled
"Fictitious Business Names." In these states, the purpose
behind the statutory scheme is identical to that articulated by
the Nevada Supreme Court in Nevada Federal, supra. See, e.g.,
Clifford Ragsdale, Inc. v. Morganti, Inc., 356 So, 2d 1~21
(Fla. App, 1978); People v. Wallace, 77 Ill. App.3d 979, 397 N.E.2d
20 (1979); Photo & Sound Co. v. Corvallis, 291 Or.
105, 628 P.2d 733 (1981); Hahten v. Jaqobs, 684 S.W.2d
433 (Mo. App. 1984); Laliberte v. Wilkins, 30 Wash. App.
782, 638 P.2d 596 (1981); Stalnaker v. Stalnaker, 180 W.
Va. 679, 379 S.E.2d 401 (1989); Crnll v. Maple Park Body Shop,
36 Ohio App.3d 153, 521N.E.2d 1099 (1987); Lighthouse Church
of Cloverleaf v. Texas Bank, 889 S.W.2d 595 (Tex. App. 1994).
As can be seen, in those states with "fictitious
name statutes," the only "notice" requirement is
to file with the state or county. One need not personally inform
those with whom they do business of the true nature of their business
entity, if one uses a d/b/a. And, in those States without statutory
schemes, the common law also does not impose such a duty of personal
notice.
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