Assumed Names in Texas

Topics Covered

Law Applicable to Assumed Names
Filing for an Assumed Name
Traditional and Series LLCs with Assumed Names
Trusts and Joint Ventures with Assumed Names
Proprietary Entitlement to an Assumed Name
Banks, Title Companies, and Assumed Names
Penalties Relating to Assumed Names

Assumed Names in Texas

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 only be held by persons or 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

The Assumed Business and Professional Name Act (Business & Commerce Code, Title 5, Chapter 71) 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.” The Business Organization Code adds further detail 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.

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 one has a Nevada LLC and wants to operate under an assumed name in Dallas or Houston; may an assumed name certificate be filed in either county—or both? Yes. The assumed name statutes expressly encompass both domestic and non-Texas entities within its scope.

FILING 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 assumed name 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, instead directing applicants to the secretary of state’s office. However, many Texas 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 a preferred 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:

[County clerk assumed name filing is required for a]: sole proprietorship; general partnership or joint venture; estates; and real estate investment Trusts.

[Secretary of state assumed name filing is required for]: 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; and 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.

Name Availability

At the county level, the county clerk will want to determine if a proposed DBA is available. 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.

TRADITIONAL AND SERIES LLCs
WITH ASSUMED NAMES

Signature Block on Documents

It is essential in a contract or conveyance that (1) the entities involved be correctly spelled in the signature block (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 potentially 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/or 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

Assumed Names for Individual 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 provides:

Bus. & Com. Code Sec. 5.051. [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.

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.

Although legal changes have eliminated the requirement of a county-level filing for state-filed entities, they have not eliminated the ability of such entities to file DBAs at the county level if they wish to do. These co-exist as parallel DBA filing mechanisms.

A Series LLC Doing Business through One of Its Series

As to assumed names for individual series, the Secretary of State provides that “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.” Does this ability extend to ordinary series? Not clear, but probably.

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.

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.

Signing Documents for a Series with an Assumed Name

So what should the assumed name for a series look like? Here is an example for an ordinary (not protected or registered) series:

ABC 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:

ABC 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

Contracts and Deeds with Notary Boxes

The following is a suggested signature line for a contract involving a registered series:

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

_____________________________________
By: Davey Crockett, Manager of Series A

TRUSTS AND JOINT VENTURES
WITH ASSUMED NAMES

Trusts and DBAs

The statute states that the term company includes “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.”

May an ordinary living trust file for a DBA? The answer is likely yes, even though trusts are technically not stand-alone legal entities. It may depend on the local county clerk. It is sometimes necessary to shop counties in order to get the DBA filing that one prefers.

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 probably should if the JV will be actively engaged in business with third parties.

The JV may also want to utilize the assumed name certificate to open a bank account and have checks printed in the JV name. Because a joint venture (when structured as a general partnership of registered entities) is not itself a registered entity, a DBA for a JV would be probably 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 proprietary trademark or copyright:

Bus. & Com. Code Sec. 71.157 (a-b). [The assumed name statute] 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. . . . [Filing an assumed name certificate] does not in itself constitute [a determination of] priority of rights [to the name].

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 a business license that is required of all registered entities such as LLCs.

BANKS, TITLE COMPANIES, AND ASSUMED NAMES

DBAs on Bank Checks

As a rule, as many activities as possible should be conducted under an LLC’s assumed name. This would include the company’s bank account and the way its checks are printed. 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 the entity.

Series DBAs and Bank Accounts

Most real estate investors do not open separate bank accounts for the individual series of a series LLC (being instead satisfied with a single account for the series LLC at large) although it is certainly possible to do so. A bank will require an assumed name certificate if an individual series wants to open an account in the name of (say) Ace Investments and then have checks printed that way. Having such a DBA would 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 basic but useful 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 any real property that is affected.

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(a). [Failure to comply with the assumed name statute] does not impair the validity of any contract or act by the person or prevent the person from defending any action or proceeding . . . but the person may not maintain . . . 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. . . .

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(a-b). A person commits a [criminal] 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. . . . 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. Certain deliberately forged or fraudulent filings, however, are a more serious matter and are a third-degree felony. Bus. & Com. Code Sec. 71.203.

Conclusion

In practice, the choice of name for an LLC may be far less important than the entity’s assumed name. Most clients 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 usually better, accompanied by a catchy assumed name.