Texas Revises Guidelines to Make Entity Name Approval Less Difficult During Business Formations
For many people starting a business and forming an entity, choosing the name of their company can be as personal and important of a decision as choosing the name of a child. After all, it is the public face of the business and something that needs to be cared for and developed. However, getting your first-choice, perfect name approved by the Texas Secretary of State (“TXSOS”) often was difficult due to the strict regulations on when a name was considered “not distinguishable” from another already in existence. Names that are not distinguishable are not available for use, but persons struggling with their business name are getting some relief.
Revisions to Texas Administrative Code sections 79.38 and 79.39, which became effective on June 1, 2018, have loosened the entity name selection guidelines. Where the previous code section contained numerous restrictions that would render a name not distinguishable (e.g., the first two words could not be the same, geographic locations and places words did not count as distinguishing factors, compound words would be treated as two words), the new rules expand the ways one name can be distinguished from another. Under the revised Section 79.38, entity names can be distinguished by having one key word difference, arranging the words in different orders, utilizing different languages, using prepositions, and using variations of the same root words. For example, “United” is distinguishable from “United One,” “Summit Energy” is distinguishable from “Energy Summit,” “Capitol Investments is distinguished from “Capital Investments,” and “Tejas Management” is distinguishable from “Texas Management.” By using rules that judge similar names on their appearance rather than strict guidelines, it should be far easier and more efficient to get a desired name approved.
That being said, with the large amount of entities formed daily in Texas and availability approval being at the discretion of TXSOS staff interpreting the guidelines, a backup name should be prepared just in case. But, unlike under the previous regulations, there is a greater likelihood an entity’s first name choice will be approved.