Establish Your Travel Business Name and Bank Accounts
Establishing your travel business name and bank account is critical to starting your new travel business and should be some of the first things that you do to get under way. Paying your start up expenses with business checks is a wonderful way to make sure that you have identified all of your business expenses and have made them separate from your personal expenses. Here is how to go about it.
As we discussed in the last tutorial, each business structure may have a different way that you need to register your business name. It is very important that you comply with the State laws for business name use in your State. You should definitely use the services of an attorney competent in business practices including setting up business structures, business name registration and trademark laws.
While each state may have different registration and publication laws for business names, all of them are somewhat similar. So here is a look at the various types of business structures and the probable business name registration requirements.
Sole Proprietors
If your are using your own name as your business name such as “Joanie Ogg, Travel Agent” then you do not need to register your name, as you are free to use it as your business name. But, if the name of the business is going to be “Luxury Alaska Cruises” you do need to file for the right to use the name.
Filing a “Fictitious Business Name Statement” or DBA
Once you have chosen your business name it is time to make sure that it is available for your use and to also open your travel business bank account. While each state is a little different, you will need to visit the state authority responsible for registering business names. Most states require you to file a “Fictitious Business Name Statement” with the local County Recorder’s Office.
You will visit the County Recorder’s Office and check the “Name Availability” files to make sure that no one else is using the name that you have selected for registration. Then you should complete and record your “Fictitious Business Names Statement” with the county clerk. Each county has different fees for the recordation and may have publication requirements, as well. Once you have recorded your name the clerk will give you the necessary receipts to prove that you have rights to the DBA of the name that is necessary to open a bank account with your new name.
Partnerships
While filing a DBA as a sole proprietor is quite easy, filing one for a partnership is a little more challenging. First of all, you should invest in having an attorney draw up a partnership agreement that deals with the potential issues that are commonplace in partnerships. The agreement should deal with the ownership of the business name should the partnership dissolve at some point in the future. Many times one partner will register the business name in their name and not the partnership’s name, or the names of the partners. This should be dealt with in the agreement.
Some States may require a copy of your partnership agreement as a requirement to register a business name in a fictitious business name statement. If the partnership is being created from a sole proprietorship because the sole proprietor is taking on partners, the ownership of the business name needs to be fully documented and ownership defined in case of a dissolution of the partnership.
Does a LLC Need a DBA?
Depending on how you are using the LLC you have created, you may, or may not want to file for a DBA. Let’s say that the name of your LLC is “Luxury Alaska Cruises LLC” and that is also your business name, then you would not need to file a DBA because you already created a legal named entity by creating the LLC. But, if you wanted to start a second business named “Luxury Alaska Shore Excursions” you would need to file for a DBA for that business name.
Some states do not require the use of your LLC in your business name, however it is wise to always include it. If you are marketing two separate products under different names such as the above example, then you should create a LLC for each one to gain the liability protection. Be sure to gain the advice of your legal and accounting professional concerning the use of LLCs in your state.
Obtaining a Travel Business Corporate Name
If you are going to start a corporation, you should seek the advice of a business attorney to help you perfect your corporate name. While you can research corporate name availability, you are best off using a legal professional to help you not only create your corporation, but to properly register the corporate name to make sure you have all rights of usage.
Your state should offer a website for “Corporate Name Availability” where you can research corporate names that are being used and therefore are not available. When you find the corporate name you wish to use, you can reserve it while you have your corporation created, Since S and C corps are really tax designations, you will not have to state which the corporation will be while creating it. Again, use your local legal professional to help you arrange your corporation correctly.
Registering and Trademarking Your Business Name
If your business is going to be local and stay local forever, you probably do not need to register your business name as a trademark, as local laws promise some trademark protection. However, if you see your business going national, or are marketing throughout the U.S. using digital technology, you should seriously consider registering your name as a trademark. Here is the difference. If you do not register your name, someone in another state could use the same name and as long as there is no overlap in market penetration, that is fine. However, if you register your name as a trademark, no one can use that name anywhere within the U.S. from the day it is registered. Identical names that have been in use can continue to use the name, they just cannot expand their market reach, Since they had a “Local Right to Use” before the registration date, they get to keep it.
Registering your business name as a trademark is relatively easy. You simply search the federal database of trademarked names to make sure that your name is not already trademarked by anyone else. The United States Patent and Trademark Office (USPTO) operates the “Trademark Electronic Search System” that you can search. In my opinion hiring a Trademark Attorney is the way to go just to make sure that no errors are made that might end up being quite costly. Once you have searched the name and found it not to violate any other trademarks, you simply complete the application and file for the trademark. The process takes several months
Opening a Travel Business Bank Account
Now that you have perfected your business name it is time to open your business checking account. While some states do not require you to have two separate bank accounts, you should always operate with both an “Operations Account” and a “Client Trust Account”.
When you sell a tour or a cruise and your client pays you via check or cash, that money is not your money. You are holding that money until you make final payment on the client’s behalf. The most ethical way to hold that money is in a separate trust account. You do not need to create a trust document to establish a trust account. You simply need to identify that the account is a self-imposed trust account to your bank. If the bank balks at this, find another bank. The account could be named “Client Security Trust Account” or some other name that would indicate that your client’s funds are being held in trust. This is most important for home based travel businesses.
Your operating account is where you pay your bills from and where your earned income goes into. Once a client’s tour or cruise is paid in full, the remaining balance is your commission and may be moved into your operating account. Many credit card transactions will be processed by suppliers and the commission sent after travel is completed. This is also considered earned revenue and would be deposited into your operating account. At no time would funds you are holding on behalf of your client (deposits and final payments) ever be deposited into your operating account.
Making sure that you have complied with name registration laws and banking laws in your state is critical to your success. Business name disputes can be costly to litigate and can result in huge judgements should you be found in violation of someone else’s rights of business name usage. This is also true if you violate your state’s banking laws. The best case is to be as conservative as possible when structuring your business.