what happenns if two buisneses have the similar name in the same city?

Unfortunately, there is no simple answer to your issue. Simply because a trade name is not registered for federal trademark recognition does not mean there are no trademark rights. On the contrary, many trade names that are not federally registered have value and can be enforced against another party. The key issues for you, though not an exhaustive list are:

1) who began using the name first (i.e., who is the "senior user")?;

2) are you both in the same industry and/or selling similar goods/services?;

3) do your logos and other trade dress items look like the other party's?;

4) has anyone actually contacted you, but was actually looking for the other party (i.e., has there been any evidence that anyone was actually confused by the similarity in names)? If you are the senior user and your trademarks/products/services are very different, you may have solid grounds to rebuff the other party's demand.

There are other factors to be considered for sure and I would definitely advise at least getting a consultation from a local attorney (I do not practice in IL). You would want to better understand what kind of hand you are playing with and whether or not you should be aggressive in responding to the other party.

I hope this helps.

Disclaimer: This answer is for informational purposes only and does not constitute general or specific legal advice, nor create an attorney client relationship.

Notice: The below is for educational and informational purposes only, is not a reflection on or a representation of any views or opinions held by my employer, and should not be construed as legal advice. Nothing herein is meant to create an attorney-client relationship.

First of all, you should always refrain from posting specific information on public forums such as Avvo, especially when there is a possibility of litigation. Therefore, I would urge you to refrain from posting anything further besides broad, general questions relating to this potential dispute.

I agree with my colleague. Unfortunately, there is no real way to answer your question without first analyzing the case based on various trademark factors (priority of use, similarity of marks, close relationship between the goods/services being offered by both parties, relationship between the parties' respective consumers, trade channels, sophistication of consumers in the trade, etc.). You mentioned that this other business owner called you. It, thus, appears that you have not yet received a cease and desist or demand letter from his attorney. You can certainly call his bluff, but if the name/trademark is of significant value to him and his company, he can certainly hire an attorney to send you a letter demanding that you stop any use of your proposed name. In fact, the attorney does not have to write any letter at all, as this other person could simply decide to file a lawsuit and/or preliminary injunction claiming infringement based on his prior rights in his mark.

As a practical matter, even if, for the sake of argument, we were to assume you have a strong legal case, since it sounds like your business is in its infancy stage and you may not yet have expended significant sums of money and other resources building it up under the name, you might consider coming up with a new name for your company to avoid any potential conflict with this other company. Otherwise, you risk having to defend your rights in court, and trademark infringement cases can get very costly quickly. Of course, even if you decide to choose a new name for your business, I would highly recommend seeking out an experienced trademark attorney to conduct or commission a search and counsel you on whether or not to seek state and/or federal registration for your mark. When starting any business, especially a brand-driven one, it is important to consider trademark and other possible intellectual property issues. Good luck.

I would agree with my colleagues. I would also add that in Illinois a corporate name needs to be distinguishable from other corporations and LLCs already on record. To avoid problems with corporate names that are too similar to ones registered in Illinois, there is a limited search for registered corporate names can be performed on the Illinois Secretary of State's website. Alternatively, a preliminary check of corporate name availability is available by telephone by calling (217) 782-6961. For LLC name availability, please call (217) 524-8008.
I have provided the links to the Illinois Secretary of State's website below.

In your case, the other business owner has not registered in Illinois. If the other business is a corporation or LLC, in most cases, it must be registered or have a certificate of authority to do business in Illinois to do business within the state. Since you state the business is not registered, it is likely that the business has not built a trade name or sufficient brand recognition in the state to have a strong claim to your proposed name.

This answer is for informational purposes only and is not intended to be legal advice nor does it establish an attorney-client relationship. Please contact me to discuss further. Otherwise, you need to consult a local business lawyer to obtain legal advice that is tailored to your circumstances and facts. Good luck to you.