Texas is one of the more
onerous states when it comes to determining whether a
proposed name for a Texas limited liability company will be
accepted as part of a new filing.
As a result, name issues are the
biggest reason new LLC filings are rejected at the state level and
these same issues cause a lot of disagreements and contention
between new business owners and the State.
The Secretary of State is required
to apply a set of conditions and rules in determining whether a name
is available and some of these rules rely on the "discretion" of the
examiner reviewing the filing. In summary, this means that
there never can be 100% certainty that your proposed Texas LLC name
will be accepted until your filing has been completely processed.
Still, it should be helpful to know
the general requirements. This Article explains:
Section 5.053 of the Texas Business
Organizations Code sets forth the general standards for name
availability, namely, that a filing entity may not have a name that
is the same as, or that the secretary of state determines to be
deceptively similar or similar to a name of another existing filing
entity or an entity name that is reserved or registered with the
secretary of state.
In addition to the laws, the State
also has imposed a set of administrative rules used to determine the
availability of entity names (these are contained in ยงยง79.30-79.54
of Title 1, Part Four of the Texas Administrative Code).
Four Determinations
for a Proposed LLC Name
1. The name is the same as another name on file. This
determination results in the name not being available and the
proposed business must supply another name choice.
2. The name is "deceptively similar" to another name on file.
This determination means that he proposed name may tend to mislead
as to the identity or affiliation of the entity. This
determination results in the name not being available and the
proposed business must supply another name choice.
3. The name is "similar" to another name on file. With this
determination, the proposed business owner has the option of
obtaining a Letter of Consent from the owner of the similar business
name. If a Letter of Consent is obtained, then the new name
which is similar to an existing name may be used.
Practically, this is a time consuming process and more often than
not another business owner will not provide a Letter of Consent for
fear of association with his/her business. The better option
here is for the new business owner to come up with another name.
4. The name is available.
Texas' Peculiar Name Rules
Texas is very strict about applying certain rules and conditions and
these rules make many names not available when they would otherwise
be available in other states. Given the large number of
corporation and Texas LLC filings and entities, the choice of a name
can be a challenging step.
Here are some key rules to be aware of:
(1) The proposed name is the
same as or deceptively similar to another name except for a
geographical designation at the end of the name;
(2) The first two words of the
proposed name are the same as or deceptively similar to another name
and those words are not frequently used in combination;
(3) The proposed name is the
same as or deceptively similar to another name except for a
numerical expression that implies that the proposed name is an
affiliate or in a series with another entity;
(4) The proposed name uses the
same words as another name but the words are in a different order in
the names;
(5) The proposed name is the
same as or deceptively similar to another name except for an
Internet locator designation at the end or at the beginning of the
name (e.g., www., .com, .org., net); or
(6) The difference in names
consists of words or contractions of words that are derived from the
same root word and there is no other distinguishing word in the
name.
These are situations which will raise red flags with the State and
usually will result in a rejection and/or a requirement that a
Letter of Consent be obtained from the other entity.
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