The Importance of Official Company Registrars
Originally Published: July 2014
It is typical for a company seeking credit to abbreviate their business name or use a partial company name on applications instead of the complete name. In some instances, the name may be incorrect due to a mistake on the part of the person filling out the application, and, unfortunately, there will be some instances when a company name is deliberately misrepresented in an attempt to commit fraud. It is 100% necessary for sellers to know the correct legal name of potential businesses they are going to be working with. The name and identity number should be listed on all sales contacts and invoices.
It is in the best interest of any company to verify the correct legal name of the buyer before credit is extended so it is known who you are providing services and or goods to, and who will be paying your invoices. This is also key in the event that a buyer defaults on payment and collection and/or legal action is required.
You can obtain any company’s legal name on the official company register by searching the state or county where the business is located.
Here's an example of how checking the company register would benefit the seller: In applying for credit, I may refer to my company (based in New York State) as “ABC,” when in reality; the legal company name is ABC-Amega Inc.
If I presented a credit application or an offer to buy under the name “ABC,” the seller would check the NYS Secretary of State’s website to verify the name, and would find that there is no such company as “ABC.” The seller would then revert to me for clarification of my correct corporate identity. This, then, would be the name used on all documents relating to the sale.
Suppose the seller failed to verify the name I gave for my company. They would not be aware that "ABC" was a common short form for identifying my company, rather than the full legal name. They would have no reason to ask me to provide the full legal name of my company. As a result, they'd draw up documents specifying "ABC" and, in effect, be dealing with a company that did not exist. You can easily see the problems that could develop.
This is a domestic example, but the principle applies to international business as well. In fact, in many countries, even sole proprietorships and partnerships must be registered and receive an identity number. Therefore, verification of the correct legal name of the company is applicable to those entities and to corporate entities alike.