Contractors who transact California business for profit under a fictitious business name must comply with California's fictitious business name statutes. Failing to do so can result in adverse business consequences, including the denial of rights to maintain a California lawsuit, unnecessarily increasing litigation costs, and potentially barring recovery altogether.
In the case of individuals, fictitious business names do not include the individual's surname (i.e., John Doe transacting business as "A1 Construction"). Names suggesting additional owners are also fictitious business names (i.e., "John Doe & Sons").
In the case of partnerships, fictitious business names either do not include the surname of each general partner or they suggest the existence of additional owners. For example, "John Doe & Sons" might be a partnership between John Doe and his son-in-laws John Moe and John Roe.
In the case of corporations, a fictitious business name is any name other than the one listed in the corporate articles. Limited partnership and limited liability company names, differing from the names in their respective limited partnership certificates and articles of organization, are also fictitious business names. Furthermore, names used by foreign limited partnerships and foreign limited liability companies that differ from the names in their Secretary of State registration applications are also fictitious business names.
One of the adverse consequences of failing to comply with the statutes is that a contractor transacting business under a fictitious business name cannot maintain a California lawsuit upon, or on account of, any contract made, or transaction had, in the fictitious business name until the contractor achieves statutory compliance. Moreover, if a contractor files a California lawsuit before achieving statutory compliance, then the contractor might incur unnecessary costs.
For example, if it is obvious from the contractor's complaint that the contractor's name is a fictitious business name, and the contractor failed to allege statutory compliance, then the complaint is subject to challenge for lack of legal capacity to sue. While the contractor might overcome the challenge by amending the complaint, the costs and hassles of opposing the challenge and/or amending the complaint would have been avoided if the contractor had complied with the statutes before filing the complaint.
On the other hand, if the complaint does not reveal a fictitious business name or the failure to allege statutory compliance, then the complaint might not be subject to challenge. However, a defendant might assert lack of statutory compliance in its answer, and if the contractor fails to achieve compliance before trial, then the contractor might lose its right to recover altogether.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
