VI. Title 1. Chapter 5: Names of Entities, Registered Agent and Registered Office
A. Entity Name Issues: Name Availability
- Although the changes to the legislative framework have made some changes to the current world of entity names, in many respects statutory and administrative requirements relating to entity names are substantially the same. It is anticipated that the leading cause of rejection on any formation filing, regardless of the type of entity, will continue to be the failure of the entity name to meet the entity name standards established by law and by the administrative rules adopted by the secretary of state.
- Name provisions for a filing entity formed on and after January 1, 2006, or for an existing entity that has elected to adopt the BOC before January 1, 2010 can be found in chapter 5 of the BOC. Section 5.053 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. Administrative rules on the availability of names of entities filed with the secretary of state are contained in Sections 79.30-79.54 of Title 1, Part Four of the Texas Administrative Code (TAC).
- Chapter 79 rules apply to all name availability determinations made for foreign and domestic corporations (for-profit, professional, and nonprofit), limited liability companies, limited partnerships, as well as professional associations formed before, as well as after, January 1, 2006. See 1 TAC §§79.30 and 79.50 to 79.52. These sections do not apply to limited liability partnerships. Section 3.08 of the TRPA and section 5.063 of the BOC do not require the secretary of state to determine the availability of a limited liability partnership’s name.
- There are three categories of name similarity:
- Names that are the same; that is, a comparison of the names reveals no differences. (1 TAC §79.36)
- Names that are deceptively similar; that is, a comparison of the names reveals apparent differences but the difference is such that the names are likely to be confused. (1 TAC §79.37) In accordance with 1 TAC §79.39, if any of the following conditions exist a proposed name is deemed to be deceptively similar to that of an existing entity:
(1) The difference in the names consists in the use of different words or abbreviations of incorporation or organization;
(2) The difference in the names consists in the use of different articles, prepositions, or conjunctions;
(3) The difference in the names consists in the appearance of periods, spaces, or other spacing symbols that do not alter the names sufficiently to make them readily distinguishable; or
(4) The difference in the name consists in the presence or absence of letters that do not alter the names sufficiently to make them readily distinguishable in oral communications.
- Names that are similar and require a letter of consent; that is, a comparison of the names reveals similarities that may tend to mislead as to the identity or affiliation of the entity. (1 TAC §79.40) In accordance with 1 TAC §79.43, if any of the following conditions exists, a name is deemed similar and a letter of consent is required:
(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.
- Letters consenting to use of a similar name are only options when the proposed name and the entity name on file are considered similar. The secretary of state will not file a proposed name deemed to be the same as or deceptively similar to an existing entity even if the existing entity is willing to provide a letter of consent.
B. Name Clearance—A Trap for the Unwary
- Formation under a given name does not give the newly organized entity the right to use the name in violation of another person’s rights. In fact, the certificate issued by the secretary of state to a domestic filing entity under the BOC specifically provides a statement that the issuance of the certificate of filing for the formation of an entity or the reservation of an entity name does not authorize the use of the entity name in this State in violation of the rights of another under the federal Trademark Act of 1946 (15 U.S.C. Section 1501 et. seq.), the Texas trademark law (Chapter 16, Texas Business & Commerce Code), or the common law. This restatement of the common law and of prior law is codified in section 5.001 of the BOC.
- When the secretary of state is requested to give advice about the availability of an entity name, the secretary of state is reviewing only the names of active domestic and foreign filing entities, as well as name reservations and name registrations on file with the secretary of state. The secretary of state does not consider state or federal trademark registrations, assumed names filed with the county or the secretary of state under Chapter 36 of the Texas Business & Commerce Code, names of limited liability partnerships registered with the secretary of state, or other sources that might indicate common law usage or reveal possible trade name or trademark infringement.
- Advice about the availability of an entity name provided by the secretary of state over the telephone or by e-mail response is preliminary advice. The decision on the acceptability of a particular name is never made until a document using the name is submitted for filing. Never advise a client to make financial expenditures or execute documents utilizing the name based on a preliminary name clearance.
C. Some Words Cause Trouble
- Words that might imply a purpose for which the entity could not be organized should not be included in a business entity name. These troublesome words include:
- Insurance must be accompanied by other words, such as agency, that remove the implication that the purpose of the entity is to be an insurer.
- Bail bonds and surety imply that the entity has insurance powers and should be formed under the Texas Insurance Code.
- Bank and derivatives of that term may not be used in a context that implies the purpose to exercise the powers of a bank. The department of banking can advise you on the use of the words bank, banc and the like and will issue you a letter of no objection for use when filing documents with the secretary of state.
(1) Persons seeking the issuance of a letter of no objection are to contact the Corporate Activities Division of the Texas Department of Banking at 2601 North Lamar Blvd., Austin, Texas 78705-4294.
(2) Submission of a written request and provision of certain information, together with a $100 filing fee, is required for consideration of the proposed name. Submission of the materials and fee is not a guarantee that the name will be approved. You may wish to contact the Corporate Activities Division of the Department of Banking for current processing time for the letter of no objection.
- Trust generally implies that the entity has trust powers and accordingly, prior approval of the department of banking is required. A foreign business trust or foreign real estate investment trust registering under the provisions of the BOC that utilizes the term trust in its name is not required to obtain a letter of no objection for purposes of filing the application for registration.
- Cooperative and Co-op should be used only by an entity operating on a cooperative basis. A firm or business that uses such terms in its business name or that represents itself as conducting business on a cooperative basis when not authorized by law to do so commits an offense. The offense is classified as a misdemeanor that is punishable by the imposition of fines or by confinement in the county jail or both.
- Perpetual care or endowment care, or any other terms that suggest “perpetual care” or “endowment care” standards, should only be used in the name of a cemetery that operates as a perpetual care cemetery in accordance with Chapter 712 of the Health & Safety Code.
- Use of some words in an entity name may require that a licensed professional be associated with the entity.
- Entities using engineer, engineering, or engineered in the entity name should be engaged in the practice of engineering and its engineering services performed by an individual licensed by the Texas Board of Professional Engineers.
- Entities using architect, architecture, landscape architect, landscape architecture or interior design should determine from the Texas Board of Architectural Examiners whether such use is in violation of the statues applicable to architects and interior designers.
- Entities using public surveying in their name should determine from the Texas Board of Professional Land Surveying whether such use complies with the statutes applicable to surveyors.
- Some words require prior approval.
- Entities desiring to use the terms college, university, seminary, school of medicine, medical school, health science center, school of law, law school, law center, and words of similar meaning must obtain prior approval of the Texas Higher Education Coordinating Board.
- Entities desiring to use the terms veteran, legion, foreign, Spanish, disabled, war or world war in a manner that might imply that the entity is a Veteran’s organization should obtain written approval from a Congressionally recognized Veteran’s organization.
- The use of some words is prohibited.
- A domestic or foreign filing entity formed on or after the effective date of the BOC may not use the term lotto or lottery in its entity name.
- State and federal law generally precludes the use of the words olympic, olympiad, olympian, and olympus unless authorized by the United States Olympic Committee.
D. Words of Organization
In general, business entities filed with the secretary of state are required to include specified words or abbreviations in the entity name that provide a clue to the type of entity using the name. Organizational designations are found in chapter 5 of the BOC.
- The names of Texas for-profit corporations must include one of the following words or abbreviations: company, incorporated, limited, Co., Corp., Inc., or Ltd. (Sec. 5.054 BOC)
- The names of foreign for-profit corporations must include one of the following words or abbreviations: company, corporation, incorporated, limited, Co., Corp., Inc., or Ltd. (Sec. 5.054 BOC) If the name of a foreign corporation registering to do business in Texas does not contain one of those words or abbreviations, the corporation is required to add one of those words or abbreviations to its name for use in Texas.
- The names of limited partnerships must contain the word limited, the phrase limited partnership, or an abbreviation of that word or phrase. (Sec. 5.055 BOC) Unlike prior law, section 5.055 does not mandate that the terms of organization appear as the last words of the entity name and does not specify the abbreviations to be use.
- The names of limited liability companies must contain the words limited liability company, limited company, or the abbreviation of one of those phrases. (Sec. 5.056 BOC) Unlike prior law, section 5.056 is not specific regarding the punctuation, capitalization, or abbreviation of the words of organization.
- The names of limited liability partnerships should use the phrase limited liability partnership or an abbreviation of that phrase. (Sec. 5.063 BOC) Unlike prior law, section 5.063 does not mandate that the terms appear as the last words of the entity name.
- If a limited partnership registers as a limited liability partnership, the name of the partnership must comply with the requirements of section 5.055 of the BOC rather than section 5.063. Under section 5.055, the name of a limited partnership that is also registering as a limited liability partnership must include the phrase limited liability partnership, limited liability limited partnership, or an abbreviation of one of those phrases.
- Nonprofit corporations are not required to use an organizational designation. (Sec. 5.054(b) BOC)
- No specific organizational designations are required of foreign REITS or business trusts registering to transact business.
E. Name Issues for Professional Entities
There are additional hurdles before selecting a name for an entity that will be rendering professional services.
- The names of professional entities must meet the same availability standards as the names of general-purpose corporations or limited liability companies.
- The name of a professional limited liability company must contain the words professional limited liability company or the abbreviation P.L.L.C. or PLLC. (Sec.5.059 BOC) The name of a professional corporation must include a word or an abbreviation required for a for-profit corporation, or it may contain the phrase professional corporation or an abbreviation of the phrase. (Sec. 5.054(c) BOC) The name of a professional association must contain the word associated, associates, or association, the phrase professional association, or an abbreviation of one of those words or that phrase. (Sec. 5.058 BOC)
- The name of a professional entity may not be contrary to law or to the ethics of the profession involved. (Sec. 5.060 BOC) The following professions have advised the secretary of state of rules or opinions concerning permissible names:
- Dentists: For a discussion of trade names, see section 259.003, Texas Occupations Code, and the administrative rules adopted by the State Board of Dental Examiners found in Chapter 108 of Title 22, Part 5, Texas Administrative Code.
- Accountants: The use of terms such as Certified Public Accountant or the abbreviation C.P.A. are permissible provided that the terms or the abbreviation are used in such a way as to make clear that the credentials relate to an individual in the professional entity rather than the firm or the other associates of the firm. Additionally, the name of the professional entity must include the name of at least one current or former member of the professional entity.
- Attorneys: The name of the professional entity must not be misleading as to the identity of the persons practicing in the professional entity. “Legal Clinic of John Smith, PLLC” would be permissible, but not “Legal Clinic, PLLC.”
- Engineers: If the words “engineer,” “engineering,” or “engineered” appear in the name of the professional entity or for-profit corporation, the firm must be involved in the practice of engineering and its engineering services must be performed by or under the supervision of a registered engineer.
- Architects: A professional entity or for-profit corporation that uses the words “architect,” “architecture,” “landscape architect,” or “interior design” in its name should determine from the Texas Board of Architectural Examiners whether the use of any of those words violates statutes or administrative rules applicable to the licensing of architects or interior designers.
- Registered Public Surveyors: A professional entity that uses any name that conveys the impression that any person involved in the firm is a professional land surveyor must ensure that an individual associated with the firm is duly registered or licensed under the Professional Land Surveying Practices Act.
F. Name Issues for Limited Partnerships
- Under prior law, a limited partnership name could not contain the name of a limited partner unless that name was also the name of a general partner or the business of the partnership had been carried on under that name before the admission of the limited partner. This prohibition was not carried forward in the BOC.
- Prior law specifically prohibited the name of a limited partnership from containing a word or phrase indicating or implying that it is a corporation. The secretary of state considers the following words and abbreviations as indicating or implying corporate status: “Incorporated,” “Corporation,” “Inc.,” and “Corp.” Although this specific prohibition is not carried forward to the BOC, section 17.46(b)(25) of the Texas Business & Commerce Code (commonly referred to as the Texas Deceptive Trade Practices-Consumer Protection Act) prohibits such use by an unincorporated entity.
- A common reason for rejection of a limited partnership name is the similarity between the name of the partnership and the name of its general partner. An entity name is deemed deceptively similar if the only difference between the names is a difference in organizational designations. (For example, ABC LP is deceptively similar to ABC, LLC.) A deceptively similar name cannot be filed even if a letter of consent can be provided.
G. Name Reservations
Recommended document filing if you anticipate a delay between the client’s name selection and your submission of the filing instrument.
- The BOC provisions relating to name reservations apply to all filing entity types; consequently, a name reservation filed on and after January 1, 2006, may be used in connection with a document filed by any foreign or domestic filing entity. For example, a name reservation filed for “Basic Filings, Inc.” may be used to form a limited partnership styled “Basic Filings, L.P.”
- Effective March 10, 2006, when submitting a name reservation online, the SOSDirect system will no longer require an applicant to indicate the entity type for which the reservation is to be applied. To submit an application to reserve an entity name online a subscriber selects Application for Name Reservation as the entity type from the drop down menu. The revised web filing incorporates the flexibility and standardization envisioned by the BOC.
- Although a name reservation is not limited to a specific entity type, the selection of a specific entity type when submitting a name reservation in person or by mail will facilitate review of the entity name. A proposed entity name for one entity type may imply or indicate an unlawful purpose for another entity type. For example, Derma Medical Services implies an unlawful purpose for a corporation, but does not imply an unlawful purpose for a professional association or professional limited liability company.
- Under the BOC, the filing fee for a name reservation is a standard fee of $40.
- Section 5.105 of the BOC permits the renewal of a current name reservation. The reservation may be renewed for an additional 120-day period by filing a new application for name reservation during the 30-day period preceding the expiration of the current reservation. The BOC filing fee for a renewal of name reservation is $40.
- The applicant of record must submit the name reservation renewal. If the renewal of reservation lists an applicant other than the applicant of record with the secretary of state, a transfer of the name reservation will be required. The fee for a transfer of name reservation is $15.
- An applicant seeking to terminate a name reservation prior to the expiration of its 120-day term would file a withdrawal of the name reservation pursuant to section 5.104(2) of the BOC. There is no fee associated with the filing of a withdrawal of a name reservation as the secretary of state is specifically prohibited from imposing a fee under section 5.1041 of the BOC.
H. Assumed Name
Section 5.051 of the BOC specifically authorizes the use of an assumed name by a domestic entity or foreign entity having authority to transact business in Texas and its filing under Chapter 36, Business & Commerce Code.
- Pursuant to section 36.02(7) of the Business & Commerce Code, an assumed name is defined as:
- for a corporation, any name other than the name stated in its articles of incorporation;
- for a limited partnership, any name other than the name stated in its certificate;
- for a limited liability company, any name other than the name stated in its articles of organization or comparable document; and
- for a limited liability partnership, any name other than the name on its application for registration or comparable document.
- The filing requirements for assumed name certificates for limited partnerships, limited liability companies, and limited liability partnerships are similar to filing requirements for assumed name certificates filed by an incorporated business or profession.
- The execution requirements for assumed name certificates filed with the secretary of state differ from county level filing requirements. The execution requirements for corporations, limited partnerships, limited liability companies, and limited liability partnerships were amended to bring the requirements in line with the execution requirements for other documents filed with the secretary of state. Chapter 36, Business & Commerce Code, authorizes the secretary of state to accept photocopies of originally signed assumed name documents and eliminates the notarization requirement for assumed name documents filed with the secretary of state.
- Dual filing of the assumed name certificate is required. An assumed name certificate is filed with the secretary of state and with the county clerk in the county where the entity maintains its registered office, principal office or principal place of business. However, due to differences in filing requirements, the assumed name certificate form promulgated by the secretary of state (SOS form 503) should not be used to file an assumed name certificate on the county level.
I. Registered Agent and Registered Office
Subchapter E of Chapter 5 of the BOC contains provisions relating to service of process, including provisions relating to registered agents and the registered office.
- The registered agent must be an individual resident of Texas or a domestic or foreign entity that is registered to do business in Texas. The secretary of state cannot be designated as the entity’s registered agent. In addition, the entity cannot act as its own registered agent.
- Although the registered office address need not be the business office address of the entity, it must be the business office address of the registered agent. The address of a commercial business that provides “private mail box” services or telephone answering services is not sufficient as a registered office address, unless the commercial enterprise is the business of the designated registered agent.
- The registered office address must be located at a street address where process may be personally served on the registered agent during normal business hours so that the agent may receive and accept service of process. For this reason, a post office box address is generally insufficient as the registered office address.
- Section 5.203 of the BOC allows a registered agent to change its name or its address by filing a statement of the change with the secretary of state. A registered agent may file a statement under this section that applies to more than one entity and that includes multiple types of entities. However, please note that there are individual fees as well as maximum fees for each different type of entity. Therefore, the statement must group the entities by type to properly calculate the fees applicable to each type of entity (SOS form 408).