Using an Assumed Name in Business

Often, a company desires to conduct its business under a name different from its legal corporate name.  This desire may arise from the inability to incorporate under the desired name or as a means of asset protection.  To accomplish these goals, the State of Texas provides that an individual or corporate entity may operate under an “assumed name” or a “doing business as” name.  In addition to allowing a business to be conducted under a unique trade name, using an assumed name may offer an additional level of asset protection because potential creditors are often not willing to undertake the level of effort required to research the corporate structure of their intended target.

The use of assumed names is governed by Texas Business & Commerce Code §71.001 et seq, which requires a notarized filing for individuals and companies operating under a trade name different from their legal name.  The requirement includes filing the appropriate certificate registering the assumed name with both the Secretary of State and the county of the entity’s principal office.  The statute’s purpose is to insure the public can determine the proper party to sue if a lawsuit is filed related to the business activities and where service of process on that party may be physically achieved. 

There is no statutory limit on the number of assumed names an individual or company may have, either at the state or county level. An assumed name filing is valid for 10 years and the filing fees at both the county and State level are nominal.  If an entity wishes to cease using an assumed name prior to the expiration of the 10 year period, the assumed name may be terminated or abandoned by filing the appropriate form just as when the assumed name was first registered.

What is the downside to not registering an assumed name at both the State and county level? While the penalties may not seem severe, failure to properly comply may impact an entity’s ability to enforce its contractual agreements if the assumed name is the only name on the contract.  For example, ABC, LLC does business as Sweets & Treats but only signs their contracts in the name Sweets & Treats.  ABC, LLC fails to properly register its assumed name at both the county and State level.  If a dispute arises with a customer, ABC, LLC may not be able to prosecute a claim for breach of contract even though the contract itself is not deemed invalid.  ABC, LLC may also be liable for payment of the other party’s attorney’s fees and expenses incurred.

It is important to note that registration of an assumed name does not assure the exclusive use of a trade name. It also does not offer the same level of protection as securing a trademark or copyright.  Even with a property registered assumed name, it may be important to seek the advice of counsel on obtaining a properly registered trademark or copyright to fully protect the business name, logo, and designs. Contact the attorneys at Waldron & Schneider for assistance in determining the best business entity registration, assumed name registration, or trademark and copyright applications to suit your individual needs.

 

DISCLAIMER: Waldron & Schneider offers the information in this article for general educational purposes only. Your use of this article does not create an attorney-client relationship. Nothing contained in this article is intended to be legal advice upon which anyone may rely. Legal counsel relating to your individual needs and circumstances should be sought before taking any official action. Waldron & Schneider does not represent you unless and until it is retained in writing. If you need legal assistance please contact us.