are we allowed to have a bad username

"a bad username"

Yes, it's within the character limits, so that's ok as long as it isn't taken.

Oh, not so literally? No, if you choose an offensive name it can be forcibly changed. Continuing to choose offensive names can result in punishment. What kind of name are you thinking of?

They essentially forcefully give you a free name change if someone reported you for name and they agree it's offensive.

After multiple offenses they will make you give a list of names to a riot support member who will choose one for you. If none of the ones you give the riot support member are deemed acceptable they will just ban your account.

At least that is my current understanding of the process.