Legal Considerations When Naming a Business in Texas

Texas is a great place to start a business. Over three million small business owners agree. To distinguish your business from all those others, you need a business name that is relevant and memorable. Furthermore, you have to follow some rules to ensure that your Texas business name is legal.

The Right Name for Your Business

It won’t help to dot and cross all the legal i’s and t’s if the name is not suitable for your business. You need a name that embodies your brand and goals. It should imply simply and clearly what you have to offer. It has to be easy to remember and easy to pronounce. The name should be flexible enough to still be relevant when your business grows or enters new markets.

And, of course, it has to be legally available for you to use in Texas.

The Best Business Structure

Before you establish a name, you should decide on your business structure. It’s not only a vital first step that affects your taxation and liability. It also determines the naming rules you’ll have to follow and whether you’ll have to register your name with the Texas Secretary of State.

• Sole proprietorship is the simplest structure. Business income is taxable personal income to the owner, and the owner is personally liable for all business liabilities. If there is a catastrophic business event such as a major lawsuit, the proprietor can lose personal assets. Their home or financial accounts could be at risk. A sole proprietorship does not have to be registered in Texas.
• General partnership produces personal income for the partners. Like a sole proprietorship, it holds partners personally liable for business obligations. Each partner can potentially be fully liable for the entirety of any business debt. Again, there’s no Texas registration requirement.
• Limited partnership holds general partners fully liable while limiting the liability of limited partners. A Certificate of Formation Limited Partnership is required.
• Corporation, either an S-Corp or C-Corp, is a separate entity from the owners and protects their personal assets. Owners can lose only the amount they have invested in the company and no more. Owners of C-Corps may be subject to double taxation. The business must pay corporate taxes, and the owners may pay personal taxes when they receive dividends.
• Limited liability company, or LLC, protects the owners from personal liability and does not pay corporate taxes. All income is passed through to the owners. It combines the most advantageous aspects of a proprietorship or partnership and a corporation. Thus the LLC is the increasingly popular choice for new business start-ups.

If you’re planning to form an LLC or a corporation, you must establish a unique name on file with the Secretary of State.

General Naming Rules

There are some general rules that apply for every form of Texas business:

• Names can include only letters, numbers, and the following special characters: “!?=+-$%#*@[]/()&.
• No name may imply an illegal purpose.
• No name may include the words “lotto” or “lottery.”
• Grossly offensive words are forbidden.
• The name may not imply a connection with a government agency.

In addition, there may be additional rules for certain lines of business.

Naming a Corporation or LLC

There are some rules that apply only to corporations and LLCs.

• All corporation names must include the word “corporation,” “incorporated,” “company,” or “limited.” An abbreviation of one of those words is acceptable.
• All LLC names must include “limited liability company,” “limited company,” or “LLC.”

In addition, all such names must be unique in Texas.

Learning Whether Your Name Is Unique

Your corporation or LLC cannot have the same name as any of the millions of other Texas business entities. Fortunately, there are many ways to learn whether the name you want to use is available.

• Email the Secretary of State at corpinfo@sos.texas.gov.
• Call the Secretary of State office at 512-463-5555 during business hours, Monday through Friday from 8:00 to 5:00 Central Time.
• Fax the office at 512-475-2761.
• Mail the office at Business & Commercial Section, Secretary of State, P.O. Box 13697, Austin, TX 78711.
• Visit in person during business hours at 1019 Brazos St., Austin, TX 78701.

Most business owners will prefer to search a database.

• The Texas Comptroller provides a search facility at Taxable Entity Search. You type in your chosen name, and the system returns a list of business entities that contain that name.
• The Texas Secretary of State website contains a service known as SOSDirect. You’ll need to use a credit card to either establish an SOSDirect account or use a temporary login.

The Texas Comptroller’s search is free but not as exhaustive.

It is also a good idea to search existing trademarks to ensure that your name doesn’t conflict with one. Trademarks are at the federal level. You can search them on the U.S. Patent Office website using the Trademark Electronic Search System (TESS).

Reserving a Name

If you have found a unique name but aren’t yet ready to start your business, you can reserve it. You can do it online through the SOSDirect service. A reservation is valid for 120 days. There is no limit on the number of names you may reserve.

Registering Your Business

When you are ready to start doing business, you must register with the Texas Secretary of State by submitting the formation documents. These are Articles of Organization for an LLC or a Certificate of Incorporation for a corporation. This can be done online or through the mail.

Trademark

You may wish to go one step further by obtaining a trademark. This protects your name or logo nationwide. You can search the U.S. Patent and Trademark Office website to ensure your chosen trademark is available. If it is, register it with the USPTO.

Doing Business As

For a corporation or LLC, the legal name is one that is registered with the State of Texas. For a sole proprietorship, it’s the name or names of the owner or the owners. However, for any type of business structure, it can be useful to present yourself to the public under some other name.

This kind of name is known as a Doing Business As name. DBA names do not have to be unique across the State of Texas. However, they may not violate U.S. trademark laws. You should still conduct a search with the U.S. Patent Office to ensure there is not an infringement.

DBA names are also called assumed names, trade names, and fictitious business names. By registering a DBA, you tell the world that your entity is conducting business under something other than its legal name.

For a sole proprietorship or partnership, the reasons for using a DBA are fairly obvious. Owner names generally don’t tell the public what the business does. They are not often catchy or memorable.

There are also some reasons a corporation or LLC might want to use a DBA name. They might have multiple divisions that offer different products or services. If they have a presence in multiple locations, that can attach the name of the city or town to the DBA name. If they enter a new line of business, they can choose a new name that is more appropriate to that business. They can use the domain of their website as a DBA name, even if it was not available as a unique business name.

To establish a Doing Business As name, file an assumed name certificate with the Texas Secretary of State. The office cannot reject the application because of a name conflict. You must also file an assumed name certificate with the office of the county clerk where you plan to do business.

Successfully Naming Your Texas Business

In most cases, your Texas business name is the first thing your potential customer knows about you. It should be easy to remember. It ought to tell the public what you have to offer.

In addition, the name must be legal in the Lone Star State. It must adhere to general rules about using proper characters and avoiding offensive or otherwise forbidden names. It cannot infringe on U.S. trademarks.

For corporations and LLCs, the name must be unique in Texas. The Secretary of State and the Comptroller provide a number of ways to determine whether the name you want is available. Once you pick a name, you may reserve it. If you choose to use it, you must register it with the Secretary of State.

Finally, you can use Doing Business As names. These are useful in telling the public more specifically what your business or each division of it offers.

The rules for legally choosing a Texas business name are neither burdensome nor difficult to comply with. However, taking the time to choose the best possible name will help get your Texas business off to a flying start.