Many businesses decide to operate under an assumed name, which is what Michigan calls a doing business as entity. There are several reasons why a business may choose an assumed name under which to operate some or all of its operations. Commonly it is because the formed name does not reflect what those business operations will be. For example, the business owner’s may have formed XYZ LLC, but are starting a new business manufacturing tea. XYZ LLC is likely not a good name for the tea operation, so the owner’s will form an assumed name of XYZ LLC- Ferndale Tea LLC, for example- under which to operate their tea operations. Alternatively, the business may simply want to differentiate their operations.
A main concern when doing this is whether the insurance for the main entity will cover the actions of the assumed name. Thus, once the assumed name is formed, the business operators should inquire with their insurance company to make sure their coverage provides protection for both the main business and it’s assumed names.
Another is to complete corporate governance documents for the two entities. This is critical for legal protections, since the owners may want to keep the operations of the two entities separate. Additionally, the original corporate governance documents may need to be amended to reflect the operations of the assumed name.