Choosing an Entity Name in Texas
One of the first things to consider when forming a corporation, LLC, partnership or other form of business entity is the entity’s name. Choosing a name can be a challenge, but if you know the filing requirements of the secretary of state, you can avoid the most common reason for having a Certificate of Formation rejected. Of course, it is always a good idea, to get some help from your business attorney, who may be able to save you time and aggravation when choosing a name.
The general standards for name availability are that the entity may not have a name that is the same as, or deceptively similar to, the name of another entity or a name that has previously been reserved. What constitutes “deceptively similar”? The secretary of state’s office makes that determination based on the guidelines described in this article.
There are three categories of name similarity:
- Names that are the same
- Names that are deceptively similar
- Names that are similar and require a letter of consent.
A name is deceptively similar to an existing entity when:
- The difference is in the word of incorporation or organization; for example “Black Cat Corp.” and “Black Cat, Ltd.”
- The difference in names consists of the use of different articles, prepositions or conjunctions; for example “Big Dog, Inc.” and “The Big Dog, Ltd.”
- The difference in names consists of punctuation or symbols that don’t change the names to make them readily distinguishable; for example “ABC Co.” and “A.B.C., Ltd.”
- The difference in names consists of common abbreviations; for example “Texas Cartoon Company” and “TX Cartoon Co.”
- The names are spelled differently but are phonetically similar; for example “Books Are Us” and “Books R Us”
- The difference in the names consists of a minor change that does not alter the names enough to make them readily distinguishable; for example “Pandora’s Box” and “Pandora’s Boxes”.
Names that are similar require a letter of consent from the entity that filed first. A name is considered to be similar when it might tend to mislead as to the identity or affiliation of an entity. Specifically, a name is similar when:
- The name is the same except for a geographical designation at the end; for example “Baggage, LP” and “Baggage Southwest, Ltd.”
- The first two words of each name are similar and are not usually used in combination; for example “Overland Lookout Cargo, LP” and “Overland Lookout Enterprises, Inc.”
- The name includes a number that implies it may be affiliated with another company; for example “ Tradition Co.” and “Tradition II Corp.”
- The name uses the same words in a different order; for example “Home Décor Co.” and “Décor Home, Inc.”
- The name is similar except for an internet designation; example “Bright Lights, LP” and www.BrightLightsCorp.com
- The name uses the same root word and there is no other distinguishing word in the name; for example “Quantum Mechanics, Inc.” and “Quantum Mechanical, LP”
Letter of Consent
The secretary of state will allow a filing with a letter of consent if the name is similar to another but not if the name is deemed to be deceptively similar. The letter does not have to be in any particular form, although the secretary of state does provide a form that can be used for the letter of consent.
Rights in a Name
The secretary of state searches names of active entities and name reservations but does not search trademarks or common law usage. In fact, the secretary of state specifically disclaims any such search by stating on the certificate of filing “The issuance of this certificate does not authorize the use of the name in this state in violation of the rights of another under the federal Trademark Act of 1946, the Texas trademark law, the Assumed Business or Professional Name Act, or the common law.”
Tips for Choosing a Business Name
Once you have selected a name for your business, determine whether the name is available with the office of the secretary of state. You can check online at the secretary of state’s web site. You can also call the secretary of state’s office at 512-463-5555 and ask for name availability. Be aware that this is a preliminary check and you may be told that the name is available, only to have the Certificate of Formation rejected when you try to file it.
Check state and federal trademarks to determine whether the name has been registered as a trademark. You can check state trademark registrations online at the secretary of state’s web site. You can check federal trademark registrations by going to the US patent and trademark web site. Even if the name has not been registered, someone may have common law rights to use it.
A quick and easy name check can be made simply by searching the name online. If the search produces a web site under that name, you may or may not want to consider using another name. If the other company was formed outside the state of Texas, the secretary of state will not consider it when evaluating your filing document. However, if the other business is similar to the business you will be conducting, you may have problems with potential customers becoming confused or you may have problems with the other company asserting its common law rights to the name.
The Lesson to be Learned
The lesson to be learned from this article is that before you spend money on letterhead, business cards and advertising, be sure to check name availability, or ask your corporate attorney to check it for you, and try to make at least a preliminary determine whether your use of a certain name might infringe on the rights of someone else who is already using the name.