Assumed Names in Texas

Assumed Names and Asset Protection

The use of one or more assumed names or DBAs is an important part of an overall asset protection plan. Why? Because asset protection is, at least in part, about the layering of incremental obstacles to a potential plaintiff. The more hurdles a plaintiff and his attorney have to climb in order to get to one’s assets, the better. The objective is to deter, discourage, and deplete a potential plaintiff’s resources. Although assumed name records are publicly available, this is an additional level of research that—believe it or not—some plaintiffs will fail to undertake.

An assumed name is merely a trade name and has no legal existence of its own. Steer Wealth Mgmt., LLC v. Denson, 537 S.W.3d 558 (Tex. App.—Houston [1st Dist.] 2017, no pet. h.). Accordingly, title to real estate may not be held in an assumed name since title may be held only by persons and legal entities

Public Interest in Disclosure

The policy behind assumed name statutes is both simple and practical: in business dealings, the public has an interest in the disclosure of true parties in interest and the location at which a party may be served with process if suit is filed.

From a disclosure perspective, DBA filing requirements appear to operate in favor of potential plaintiffs. There is, however, a sense in which they favor defendants. Suits are filed every day against assumed-name defendants, particularly at the justice court level. Consider a hypothetical auto dealership, “Northside Chevrolet.” If a suit is filed against Northside Chevrolet, it is subject to immediate dismissal upon motion by Northside’s attorney. Why? Because Northside Chevrolet is probably not a legal entity. It is more likely an assumed name of a corporation or LLC that is doing business under the name Northside Chevrolet. The result is that the plaintiff must now go home, do research, and re-file the case (paying additional fees and costs in the process) against the true principal behind the DBA. The legal entity may not even have its business headquarters in that county, requiring a request for out-of-county service of process, another delay and expense. A certain percentage of plaintiffs will instead give up at this point.

LAW APPLICABLE TO ASSUMED NAMES

Business & Commerce Code

Texas Business & Commerce Code, Title 5, Chapter 71 (the “Assumed Business and Professional Name Act”) states that a “corporation, limited partnership, limited liability partnership, limited liability company, registered series of a limited liability company, or foreign filing entity must file a[n assumed name] certificate . . . if the registered series or entity: (1) regularly conducts business or renders professional services in this state under an assumed name; or (2) is required by law to use an assumed name in this state to conduct business or render professional services.” Definitions and requirements are as follows:

Bus. & Com. Code Sec. 71.002(2). “Assumed name” means:

(A) for an individual, [if the enterprise proposes to operate under] a name that does
not include the surname of the individual;

(B) for a partnership, [if the enterprise proposes to operate under] a name that
does not include the surname or other legal name of each joint venturer or general partner;

(C) for an individual or a partnership, [if the enterprise proposes to operate under]
a name, including a surname, that suggests the existence of additional owners by including words such as “Company,” “& Company,” “& Son,” “& Sons,” “& Associates,” “Brothers,” and similar words, but not words that merely describe the business being conducted or the professional service being rendered;

(D) for a limited partnership, [if the enterprise proposes to operate under] a name
other than the name stated in its certificate of formation;

(E) for a company, [if the enterprise proposes to operate under] a name used by the
company;

(F) for a corporation, [if the enterprise proposes to operate under] a name other
than the name stated in its certificate of formation or a comparable document;

(G) for a limited liability partnership, [if the enterprise proposes to operate under]
a name other than the name stated in its application filed with the office of the secretary of state or a comparable document; and

(H) or a limited liability company, [if the enterprise proposes to operate under]
a name other than the name stated in its certificate of formation or a comparable document including the name of any protected series of the limited liability company established by its company agreement if the name of the protected series does not include the name of the limited liability company stated in the limited liability company’s certificate of formation or a comparable document; and

(I) or a registered series of a domestic limited liability company, a name other
than the name state in its certificate of registered series.

Business Organizations Code

Bus. Org. Code Sec. 5.051. Assumed Name

A domestic entity, a protected series or registered series of a domestic limited liability company, or a foreign entity have authority to transact business in this state may transact business under an assumed name on compliance with Chapter 71, Business & Commerce Code.

Suppose you have a Nevada LLC and want to operate under an assumed name in Dallas or Houston, may you file an assumed name certificate in either county (or both) and do so? Absolutely. The assumed name statutes expressly encompass both domestic and foreign entities within its scope.

WHERE TO FILE FOR AN ASSUMED NAME

County Versus State Filing of DBAs

Obtaining a DBA is a logical next step after forming an LLC. But where should the filing occur—at the county clerk’s office or with the secretary of state?

There are 254 counties in Texas, many of which still accept assumed name filings, although some have ceased doing so. Go to the county clerk’s website in the county in which you propose to operate, file the necessary form, and pay the nominal filing fee (usually $15). A filing is good for 10 years.

For state-level filings, go to www.sos.state.tx.us and complete form 503 ($25 filing fee). This form requires an applicant to state the counties in which an assumed name will be used. If the entity will potentially use its assumed name in all counties in Texas, check the box for “All.”

County-Level Filings

Business and Commerce Code Section 71.103(a) was amended in 2019 to eliminate the county-level DBA filing requirement for registered entities (corporations, LLCs, limited partnerships, etc.) that file an assumed name certificate with the Secretary of State. The county-level filing requirement remains for non-registered entities such as general partnerships, joint ventures, and sole proprietors who are doing business within the county.

Some counties have stopped accepting assumed name filings for LLCs and corporations. For example, the Dallas County Clerk posts this notice on their website:

Due to recent legislative changes (House Bill 3609); Incorporated Assumed Name forms are no longer recorded locally with the County Clerk’s Office. They are filed with the office of the Secretary of State only. The changes made by HB 3609 became effective September 1, 2019, and apply to the following: assumed name certificates filed by corporations, limited partnerships, limited liability companies, limited liability partnerships and foreign filing entities. Unincorporated Assumed Name (DBA’s) certificates will continue to be filed with the County Clerk’s Office and are required for the following: sole proprietorships, sole practitioners, general partnerships, joint ventures, joint stock companies, domestic real estate investment trusts, estates, non-profits, and trusts.

The above statement is less than fully correct. To be clear, the new law does not say that county clerks may not accept assumed name filings for registered entities such as LLCs—only that county-level filing is no longer required—which is not the same thing. Many counties still accept such filings and are likely to continue doing so because it generates revenue. So it may be strategically beneficial in a specific case to consider filing a county-level DBA, particularly since no statewide database exists for these county assumed-name filings.

Choice of County

If one is obtaining a county-level assumed name for banking purposes and everyday usage, does it matter in which of Texas’ 254 counties you file? Surprisingly, not much. Even if you are doing business in Houston, a bank will often accept a DBA from El Paso County for purposes of opening an account and ordering checks in the assumed name.

Choice of county may be important when one is seeking a specific assumed name that is not available (i.e., is already taken) in larger counties such as Harris, Dallas, and Travis. Obtaining the assumed name in a less populated county may result in getting many of the same benefits.

Guidance from the Secretary of State

The following guidance appears on the Secretary of State’s website:

Query: Where do I file my assumed name certificate?

Regardless of where in Texas you are using an assumed name, an assumed name certificate must be filed as follows:

The following types of persons are required to file an assumed name certificate with the county clerk in each county in which a business office is or will be maintained. If the person does not maintain a business office in Texas, then in each county in which the person conducts business.

Sole proprietorship
General partnership or joint venture
Estates
Real Estate Investment Trusts

Any other type of business entity not included above or those listed below as filing with the secretary of state.

Persons who file on the county level should contact the applicable county clerks’ offices for information on fees and on filing a certificate.

The following types of Texas or foreign business entities are required to file an assumed name certificate with the secretary of state.

Corporations (for-profit, nonprofit and professional) or other incorporated entities
Limited liability companies (including professional limited liability companies)
Limited partnerships
Professional associations
Limited liability partnerships
Foreign filing entities

Business entities that file an assumed name certificate with the secretary of state are not required to file an assumed name certificate with the county clerk. House Bill 3609 which became effective September 1, 2019, amended Chapter 71 of the Texas Business & Commerce Code to eliminate the county-level filing requirement for such entities.

Name Availability

At the county level, the county clerk will want to determine if a proposed DBA is available. The customary standard is that your proposed name must not be the same as or deceptively similar to another entity’s filed assumed name within that county. At the state level, however, the DBA filing is purely a notice filing, meaning that it is not necessary to first ascertain if a certain name is available. Just create a name (without regard to whether or not it is already in use) and file Form 503.

There is no statutory limit on the number of DBAs an individual or company may have, either at the county or state level.

Signing Documents for a Traditional LLC with a DBA

It is essential in a contract or conveyance that (1) the entities involved be correctly described (exactly as indicated in their certificates of formation) and (2) the capacities of persons signing on behalf of those entities be correctly shown. Failure to do this can be mean failure of the instrument.

In this context, it absolutely matters if the entity is a traditional or a series LLC; if the party involved is the company at large or a specific series of the company; and if the LLC or series is manager-managed or member-managed (the titles manager and managing member are not the same thing).

A sample signature line for an LLC with an assumed name is as follows:

Ace Holdings LLC, a Texas Limited Liability Company DBA Texas Hold ‘Em Investments

_______________________________________
By: Ace Ventura, Manager

or this would be an abbreviated but acceptable version:

Ace Holdings LLC DBA Texas Hold ‘Em Investments

_______________________________________
By: Ace Ventura, Manager

SERIES LLCs AND ASSUMED NAMES

Assumed Names for Series

While previously the Secretary of State rejected DBAs for series (because they are technically not separate legal entities), Business Organizations Code Section 5.051 now expressly provides that a “domestic entity, a protected series or registered series of a domestic limited liability company, or a foreign entity having authority to transact business in this state may transact business under an assumed name by filing an assumed name certificate [with the secretary of state] in accordance with Chapter 71, Business & Commerce Code.” This is a welcome change since it is no longer necessary to go to the county clerk in order to obtain an assumed name for a series.

Business entities that file an assumed name certificate with the secretary of state are not required to file an assumed name certificate at the county level. Note, however, that although the amended Chapter 71 of the Texas Business & Commerce Code eliminates the requirement of a county-level filing requirement for entities that file with the state, it does not eliminate the ability of such entities to file DBAs at both levels if they wish to do.

A Series LLC Doing Business through One of Its Series

The Secretary of State provides the following explanation on its website:

Query: If a protected series or registered series does business under a specific name, should an assumed name certificate be filed?

Maybe. A protected series or registered series may transact business under an assumed name by filing an assumed name certificate in compliance with Chapter 71 of the Texas Business and Commerce Code. If the name of each or any protected series does not include the full legal name of the “parent” LLC and the series is conducting business, then the “parent” LLC must file an assumed name certificate on behalf of the protected series. (See SB 1514 (PDF), effective 9/01/23).

If a registered series conducts business under a name other than the name stated in its certificate of registered series, then the registered series must file an assumed name certificate for that name. A registered series is not required to file an assumed name certificate under the name of the registered series as stated in its certificate of registered series. (See SB 1523 (PDF), effective 6/01/22).

Signing Documents for a Series with a DBA

So what should the assumed name for a series look like? Let’s start with the correct name of the series itself. Here is an example for an ordinary (not protected or registered) series:

Alamo LLC—Series A, a series of ABC LLC,
a Texas series limited liability company

This is how an ordinary series (i.e., not registered or protected) without an assumed name should be described in legal documents such as contracts and deeds. If, however, the series is a registered or protected series, then registered or protected should be inserted:

Alamo LLC—Series A, a protected series of ABC LLC,
a Texas series limited liability company

Suppose, however, the intention is to call this series by the assumed name “Alamo Assets.” According to Business & Commerce Code Section 71.102, the assumed name certificate must state the name of the series as stated in the company agreement (and, if applicable, the certificate of registered series) as well as the name of the LLC as stated in the company’s certificate of formation. So a correct formulation might be:

Alamo LLC—Series A, a registered series of Alamo LLC,
a Texas series limited liability company DBA Alamo Assets

_______________________________________
By: Ace Ventura, Manager of Series A

or an abbreviated but acceptable version:

Alamo LLC—Series A DBA Alamo Assets

_______________________________________
By: Ace Ventura, Manager

Signature Lines and Notary Boxes

The following is a suggested format for a contract involving a registered series:

Purchaser:
Alamo LLC–Series A, a registered series of Alamo LLC,
a Texas series limited liability company DBA Alamo Assets

_______________________________________
By: David Crockett, Manager of Series A

THE STATE OF TEXAS
COUNTY OF BEXAR

Personally appeared before me David Crockett, Manager of Alamo LLC–Series A, a registered series of Alamo LLC, a Texas series limited liability company DBA Alamo Assets, who acknowledged executing the foregoing instrument on behalf of said series in the capacity stated and for the purposes and consideration therein expressed on ____________, 202___.

_______________________________________
Notary Public, State of Texas

OTHER BUSINESS VEHICLES

Trusts and DBAs

Interestingly, the assumed name statutes do not mention trusts, which are a common asset protection device. Are these covered by the law? Must a trust file a DBA if the trust is doing business under anything other than its complete formal name? The answer is likely yes, even though trusts are technically not stand-alone legal entities (though they often act as such in the real world).

Until a Texas case opines to the contrary, it may be prudent to assume that a trust falls under the term “company,” at least for purposes of the statute; and “company” is defined as “a real estate investment trust, a joint-stock company, or any other business, professional, or other association or legal entity that is not incorporated, other than a partnership, limited partnership, limited liability company, limited liability partnership, or foreign filing entity.”

In terms of an individual real estate investor’s asset protection, this is actually good news. If one is conducting business with a land trust then one probably and prudently should acquire a county-level assumed name for public use.

Joint Ventures and DBAs

Joint ventures are common in real estate investing. They can be loosely defined as general partnerships that are created to achieve a specific purpose, often involving a single property or asset. Can a joint venture get a DBA? Yes, and it should if the JV will be actively engaged in business with third parties.

The JV should also utilize the assumed name certificate to open a bank account and have checks printed in the JV name. Because a joint venture (if structured in the usual and correct way, as a general partnership of registered entities) is not itself a registered entity, a DBA would be obtainable only at the county level.

PROPRIETARY ENTITLEMENT TO AN ASSUMED NAME

Exclusive Use

The filing of an assumed name certificate does not assure ownership or exclusive use of a DBA and is not the equivalent of obtaining a trademark or copyright:

Bus. & Com. Code Sec. 71.157. Effect of Filing

(a) This chapter does not give a registrant a right to use the assumed name in violation of the common or statutory law of unfair competition or unfair trade practices, common law copyright, or similar law.

(b) The filing of a certificate under this chapter does not in itself constitute actual use of the assumed name stated in the certificate for purposes of determining priority of rights.

Even if one obtains a DBA in the local county, there are still other Texas counties (not to mention the secretary of state’s office) where someone else may lawfully file to use the same or a similar assumed name.

Common-Law Recognition

It is nonetheless the case that an assumed name may, over time, acquire public recognition and acceptance in the geographical area in which it is used, increasing one’s potential entitlement (at common law, not statutory law) to the proprietary and exclusive use of that DBA. County clerks, to a certain extent, aid in this process by declining to issue identical assumed names to rival enterprises within their borders. A DBA is nonetheless no substitute for obtaining a proper trademark or copyright, which is a highly technical field. Consult an expert.

It should also be noted that an assumed name certificate for an LLC is not a business license, which is not required in Texas except for specific industries. Other states differ. Nevada, for instance, currently charges $200 annually for its business license, which is required of all registered entities such as LLCs.

BANKS AND TITLE COMPANIES

LLC Bank Accounts and DBAs

Forming an LLC and then failing to get a DBA and do business under it reflects an incomplete process from an asset protection perspective. As a rule, as many activities as possible should be conducted under an LLC’s assumed name. There is simply no good reason to make it easy for a potential plaintiff to know the identity or location of the true party in interest behind your entity or any transaction in which it is involved.

Banks and Series DBAs

As to banking, the importance of having a DBA for Series A, Series B, Series C, and so forth is relevant if one chooses to open a bank account solely and specifically for the use of an individual series. A bank will require an assumed name certificate if an individual series wants to open an account in the name Ace Investments and then have checks printed that way. Having such a DBA also entitles the series to lawfully print business cards and stationery that read “Ace Investments” with no disclosure that the principal behind the scenes is in fact an individual series of a series LLC. This is elementary but useful in asset protection.

Title Companies and DBA Requirements

Title companies are sensitive to DBA issues and can be expected to point out deficiencies in this area. If an LLC (traditional or series) has not filed a required assumed name certificate. it will likely be asked to do so before closing on either the purchase or sale of real property.
As a practical matter, neither banks nor title companies appear to care whether one’s assumed name certificate is issued by the Secretary of State or by the local county clerk, just so long as an official file-stamped certificate exists—but this can vary.

PENALTIES RELATING TO ASSUMED NAMES

Statutory Penalties

Penalties for failing to fully comply with the Assumed Business and Professional Name Act are generally mild:

Bus. & Com. Code Sec. 71.201. Civil Action; Sanction

(a) A person’s failure to comply with this chapter does not impair the validity of any
contract or act by the person or prevent the person from defending any action or proceeding in any court of this state, but the person may not maintain in a court of this state an action or proceeding arising out of a contract or act in which an assumed name was used until an original, new, or renewed certificate has been filed as required by this chapter.

(b) In an action or proceeding brought against a person who has not complied with
this chapter, the court may award the plaintiff or other party bringing the action or proceeding expenses incurred, including attorney’s fees, in locating and effecting service of process on the defendant.

In a civil suit, then, a violator may need to immediately file an assumed name certificate in order to proceed with the prosecution or defense of a suit. It may also be ordered to pay the costs and fees associated with inconveniencing the other party. These are not heavy sanctions.

Note that “failure to register an assumed name does not ‘impair the validity of any contract or act by the person.’ Accordingly, when evidence shows an entity is doing business under another name, it may be held liable under that name without regard to whether it filed an assumed name certificate.” Bremer v. Houston Lawyer Referral Serv. 407 S.W.3d 477, 482 (Tex.App.—Houston [14th Dist.] 2013, no pet.).

There is, however, a criminal penalty for an intentional violation:

Bus. & Com. Code Sec. 71.202. Criminal Penalty: General Violation

(a) A person commits an offense if the person: (1) conducts business or renders a professional service in this state under an assumed name; and (2) intentionally violates this chapter. (b) An offense under this section is a Class A misdemeanor.

As with most criminal offenses, the district attorney must prove criminal intent. It is far more likely that a person or company failing to comply simply overlooked the details of the statute. Forged or fraudulent filings, however, are a more serious matter and are designated as a third-degree felony (Bus. & Com. Code Sec. 71.203).

THE TWO-COMPANY STRUCTURE AND ASSUMED NAMES

Best practices in asset protection require that the functions of management and holding of assets be clearly split from one another. This typically takes the form of two LLCs—a management company (a traditional LLC) and a holding company (a series LLC) for hard assets like real estate. In order to complete the asset protection picture, both LLCs in the two-company structure should obtain and utilize assumed names for day-to-day business purposes.

In practice, the choice of name for an LLC is far less important than the DBA. Most clients unnecessarily spend considerable time and energy choosing an LLC name that unwisely includes or reveals their personal names or other sensitive information. Something generic for the LLC is always better, accompanied by a catchy assumed name.

When it comes to the management company, the preferred practice from an asset protection point of view is to withhold the proper name of the management company whenever possible and instead use the company’s assumed name on leases, checks, and other dealings with tenants and the public.

Acquiring an assumed name may be less critical for the holding company since this entity should remain, to the greatest extent possible, uninvolved with and invisible to the public.