Companies are incorporated for two basic purposes. They either (1) hold an asset or investment and use the corporation for accounting purposes and as such never deal with the general public or, (2) in the majority of circumstances, they deal in wares and services that they sell to the public. Corporations that deal with the public need good names.

The discussion of what constitutes a good name can best be dealt with if we examine what names are bad. At the top of the list of bad names is the use of a number as a name. It seems that every time you read about a corrupt politician, a slum landlord, or a shady business you also read that they carried on business using a numbered company. The public perception of a numbered company is "here is someone with something to hide, someone we can not trust". For this reason these names have negative connotations. Don't use one if you are dealing with the public. However, there is nothing wrong with using a numbered company to hold an asset.

Laudatory term such as: holdings, enterprises, developments, investments, international, trading, consulting or communications, to name just a few, are all bad to use if a corporate name is before the public. The public has no idea what any of these businesses do, the products sold or the services offered. The failure rate among these companies is extremely high. We believe this failure rate stems from the fact that the buying public, when viewing the name, will have absolutely no motivation to deal with this company as they have no idea what they are all about.

To demonstrate this position form a corporate name by adding any laudatory term in the middle of the phrase Bill's ____ Ltd. Now ask yourself, what does Bill do for a living? If you saw his name in the white pages of your phone book would you be reminded to call him? If you remembered that Bill had a business, would you know what section of the yellow pages to search for his phone number.

The third set of bad names are those that use initials. We can all think of a couple of companies that have used initials successfully. IBM and A&W come to mind, however, who can think of 10 more. The reason for this is simple. The public tries to associate the initials as being an acronym or abbreviation for words. When the public can not determine the meaning of the initials they have nothing to associate with the business and therefore they forget who they are. Once the public forgets who you are, they stop buying from you.

The fourth set of bad names are geographic names. Why would anyone think that calling your business Toronto International Trading Ltd. would stand you above the crowd? There must be a couple of hundred thousand businesses in Toronto. How can this name be unique?

Far to many people who form companies believe that the name they select needs to be broad enough in its name to encompass any activity that they may ever get involved in. The fact of the matter is that any business that grows to the point where it diversifies, will also spin off a related company to pursue these new activities.

Now that you have seen what constitutes a bad name lets examine how good names are derived. A good name is one with which the public can identify. A good name consists of three elements.

1. First a distinctive element. This is a word or phrase that clearly distinguishes your name from every other name in your field of competition. This word or phrase can be your own name or one that you have coined or invented.
   
2. The second element is a descriptive character. This word or phrase describes to the public the nature of your work, the services you offer or the products that you sell. If you are in the trucking business then state so.
   
3. The last element is the legal element. Each province requires that each for profit corporation include as part of its name one of the following legal elements. Limited or Ltd., Corporation or Corp., Incorporated or Inc. Provinces will also allow, under certain circumstances, the word "Canada" as the legal element. Naturally they all accept the French equivalents.

Naming a business is more important than most people realize. Everything you purchase has a brand name attached to it, from the clothing you wear to the groceries you buy - everything has a name that the company took pains to think up. A name is an important marketing tool that should come to the mind of consumers at the time of purchase. If a name is hard to pronounce, too long or easily forgettable, the consumer will likely purchase the product or service of another company. As well, consumers quickly forget names that are difficult or confusing.

Five criteria to keep in mind when naming your company:

1. A name must be distinctive, credible and memorable.
2. The name must not cause confusion with any existing name or trademark.
3. The name must include a legal element.
4. The name must not include unacceptable terms.
5. The name should be trans-cultural.

Confusion with other names or trademarks:

If your name is too close to an existing name or trademark, the owner of it could launch a court action in order to get you to stop using the name. It is in your best interest to avoid this situation as by this time you will probably have invested much time, effort and money both choosing and advertising a name. The federal name approval process helps you to avoid this problem by identifying potentially confusing names or trademarks in a federal database of names, thus ensuring that confusion is not likely. Name approval from the Corporations Directorate does not guarantee that you are not violating the rights of another firm, but it significantly reduces your risks.

Legal Element:

The accepted way to include a legal element in a corporate name is to add a term such as Limited (Ltd.), Incorporated (Inc.), or Corporation (Corp.) to the end of the name. All names have to be legally registered, which involves searches to ensure that another company has not already taken the name.

Unacceptable terms:

The name you choose for your company cannot suggest that you are a branch of government or that you have the approval by some unit of government; i.e. names containing "Parliamentary, Premier's or Legislative" would very likely be rejected. Also, you cannot name your company something that misleads your customers by falsely describing your company. Finally, you cannot use obscene terms, or terms that suggest that your business provides obscene, scandalous, or immoral services.

Trans-cultural:

It is important to think global when naming a company in the event that your company expands to compete in the international market. It may seem too long-term or unlikely at the present, but it is a possibility. Different names have different meanings in other cultures, therefore, it would be advisable to do some investigating before you register your name. If you don't take the time to come up with a proper name initially, you may be faced with renaming your company in the future. You will also want to check that your name has no unfriendly connotation in any other language as it could offend customers from another country and put a halt to your business dealings. A well-known example of this is the sale of a car called the GM Nova in Spanish-speaking countries. "No-Va" means "no go", therefore, you can imagine that this car was not a big seller in a number of countries. There are countless names of companies and brands that learned this lesson the hard way. Be sure to do research and ensure that this does not happen to you.

Naming techniques used in the past:

There are a number of naming techniques that have been used frequently in the past. We will explore any advantages and disadvantages attached with these techniques.

1) Using ones own Surnames:

Naming a business after oneself has been used frequently in the past. For example, Ford, Kraft, and Heinz are all named after their founders. This method continues to be a popular naming technique, however, there are a few potential disadvantages. Your personal reputation could be tarnished should you experience financial problems or bankruptcy. Also, in the event that you sell your company, your name would go with it. The new owners actions could negatively affect your reputation. On the flip side, public embarrassment by you, the founder, could damage the company name and have an adverse affect on your company. Also, when the founder dies or is absent from the company, this can create confusion among the public.

2) Geographic Names:

Using the name of a city, province or territory in a company name can be surprisingly limiting in the event that the company expands to serve other geographical regions. For example, names such as Alberta Logging or Edmonton Clothiers can seriously limit the company as it implies a geographic limitation, it is hard to transfer across borders, and it can create confusion.

3) Descriptive Names:

Names that describe the nature of a company can get long and cumbersome. A name will not be distinctive if it merely describes the nature of the businesses activities. For example, a name such as International Communication Corporation describes the company but does not roll off the tongue easily and is not very distinctive or memorable. With all the clutter in today's society, a name is only effective if it is unique. Some companies that started off with descriptive names turned to initials to shorten up the name. International Business Machines became IBM. Although this technique worked well for them, it is not necessarily advisable to do this as initials escape the memory easily.

Words bearing no relationship to the company have been used often as well. For instance, Apple Computers or Carnation Foods have become household names because they are so well known, however, because this method of naming bears no resemblance to the product or service offered, it may not initially stick in the consumers mind (This is where advertising comes into play).

4) Coined Names:

Coined words are names which are composed through fabrication, through the combination of words, or by combining the first initials of a phrase to make a word. These names are increasingly popular as they have no dictionary meaning and can be transferred to any type of business. The advantages are that they are unlimited in scope and language and they are completely proprietary. Made-up words give a name distinctiveness and are given greater protection because they are unique. Examples:

Kodak - Was created to be pronounceable in as many languages as possible.

Telus - Was created by combining "telecommunications" and "universality".

Applying for a corporate name:

Federal incorporation allows your business to operate using its corporate name right across Canada. After you have chosen your name, you must submit a NUANS name search report as part of your application to use your corporate name. The one you need for federal incorporation is a Canada-biased report. This report ensures that the proposed name was searched against all the names found in the database, not just names registered in a particular province.