Legal Question in Business Law in California

Re: The Name of an LLC Upon Dissolution

Your friend is wrong.

Once the LLC is dissolved anyone may use the name, unless there is a contractual obligation between the two of you not to do so.

Re: The Name of an LLC Upon Dissolution

There are two aspects to the question of right to use the name after dissolution: the Secretary of State's position on re-use, and the intellectual property issues.

Mr. Telanoff is correct that the name can be re-used immediately, by anyone, after dissolution, insofar as the Secretary of State cares. However, the Secretary of State does not get involved in ownership-of-name issues; that office's only role is to make sure there are never two companies registered by it that have confusingly similar names at the same time.

A business name is a kind of intangible property. It may have value and it may be protected from unauthorized use, even though not formally trademarked. When the company is dissolved, the name should be treated as though it were like the other property of the business, like cash, office furniture, accounts receivable, inventory, etc. It's part of the goodwill. The actual value may be low, or even zero, but the fact that the co-owners are squabbling over it seems to suggest there is value.

In dissolving the business, the former co-owners should pay all the bills, then divide the rest among themselves in proportion to their capital accounts. If the name has value, someone should get the name in exchange for less other stuff (cash, unsold merchandise, etc.) so the proportions are maintained in the final distribution and liquidation.

The fact that you created the name probably is meaningless; you would implicitly have contributed it to the LLC as part of your capital - but if the name had value back then, that would (or should) be reflected in your capital account.

If you have an outside accountant, he or she may be able to assist.

It is not "illegal" in the usual sense of that word for a party to keep and re-use a once-used business name, any more than it is "illegal" for a former owner to re-use the dissolved company's cash register, but one must ask whether the property was acquired appropriately in the liquidation process and each ex-owner got a fair share AFTER the creditors got theirs.