In contract drafting, one of the most overlooked yet fundamental details is getting the legal name of the parties exactly right. It seems obvious, but it’s astonishing how often businesses omit crucial parts of their legal names—like “Inc.,” “LLC,” or “LLP”—or substitute them with abbreviations, trademarks, or informal trade names. These seemingly small shortcuts can create real legal confusion and cost real money.
Common Mistakes and How They Create Confusion
Let’s consider a real-life example involving a client we’ll call Acme Company. Acme Company (a real, registered entity) was unexpectedly served with a lawsuit by a commercial landlord seeking back rent from a defaulting tenant. But Acme Company had never signed that lease. The actual tenant had been Acme Corporation, a completely different legal entity.
So how did the confusion happen?
Unfortunately, Acme Company had used variations of its name in marketing materials, website domains, and even on invoices—such as “Acme Co.” or “Acme Corporation”—despite not being legally incorporated as such. The business owners mistakenly assumed that, since they operated as a corporation, they could use “Inc.” or “Corporation” interchangeably. This inconsistency led the landlord to believe Acme Company was the responsible tenant.
Only after many billable attorney hours was Acme Company able to convince the landlord that the complaint had been misdirected. The inconsistency between legal names and trade names turned what should have been a simple case of mistaken identity into a costly and avoidable mess.
Another Example: The LLC Maze
Another client was a property owner considering an offer from a buyer that had multiple LLCs under a single parent entity, let’s call it Master LLC. For each new property acquisition, the buyer would form a new subsidiary entity: Master1 LLC, Master2 LLC, and so on.
When the buyer presented an offer, they identified the buyer as “Master LLC or its relevant assigns.” That phrase raised immediate red flags. It was not clear who exactly was going to sign the purchase agreement, take title to the property, or be responsible if the buyer defaulted. If the deal fell apart, who would the seller sue? The ambiguity around the buyer’s identity created unnecessary legal risk and could have undermined enforceability.
Legal Names vs. Fictitious Business Names
California law provides a framework for distinguishing between legal names and “fictitious business names” (commonly referred to as DBAs). Under California Business & Professions Code § 17900, any person or entity doing business in California under a name other than their true legal name must file a Fictitious Business Name Statement. Failing to do so not only invites confusion but can also restrict, or even prevent, a business’s ability to enforce contracts in court (see B&P Code § 17918).
Best Practices
- Always use the full legal name of the business in every contract, including “Inc.,” “LLC,” or “LLP” as applicable.
- Avoid using trade names, trademarks, or shortened versions like “Co.” or “Corp.” unless they match the legal registration.
- Verify the name against Secretary of State records (https://bizfileonline.sos.ca.gov/).
- Register DBAs if you intend to use a name other than your legal entity name.
- Clarify in writing who the contracting party is—especially in deals involving multiple related entities.
Final Thoughts
The names listed on a contract are not a formality—they are essential to determining who has rights and obligations under the agreement. Sloppy name usage can expose your clients to litigation, mistaken identity claims, or contract enforcement issues.
Taking the time to verify and consistently use the correct legal name can prevent major headaches down the road. As simple as it sounds, it’s one of the easiest ways to reduce legal risk in your contracts.