Reserved Keywords in Microsoft SQL Server are not accepted. You cannot name a SQL Instance as DATABASE or ALTER or CREATE or SCHEMA (of course Capitals Letters does not matter).
First character should not be a numerical value (0-9), it can be an alphabet (a-z), underscore ‘_’, number sign ‘#’, or ampersand ‘&’.
Space and special characters (such as @, ^, *, \ ) are not allowed.
Instance name should be 16 chars or less in length.