CORPORATE TRANSACTIONS & COMPLIANCE BLOG

The Pros & Cons of Using Assumed Names

By: Krystal Beckner, COGENCY GLOBAL INC. on Thu, May 03, 2018

Sticks and Stones May Break Your Bones, but Names Can Never Hurt You

Pros and Cons of Assumed Names - Who Are We - Fotolia_117089719_S

You’ve formed your legal entity and filed all the required legal documents in order to do business. Now you’ve decided you’d like a little more pizzazz in your business name to help increase name recognition and distinguish your business from others. An assumed or fictitious name may be just the ticket you’re looking for.

However, using an assumed and/or fictitious name has challenges—especially when it comes to service of process and other legal documents. By following a few simple safeguards, these challenges can be minimized.

First Things First

If you will be using a name that's different from the legal name of your business, you’ll want to carefully review state requirements. (For the purposes of this article, the term “assumed name” includes any alternative name type, e.g. trade name, fictitious name, d/b/a name, etc.) This may require registering the name you want to use with the appropriate state or local government agency. In many cases, the assumed name must be renewed periodically (time frames vary by state).

Renewal filings for assumed names are typically a separate filing, with a different due date than that of your company’s annual report. It is important to make sure you adhere to the myriad state and local requirements. Failure to file an assumed name certificate may result in numerous issues, including plaintiffs charging your company with the expenses of locating and effecting service of process on your company as a defendant if this information is not easily found on the public record.

But Wait…There’s More!

You’ve reviewed the requirements and are confident the assumed name has been properly registered with the state or local government agency. You’re golden, right?

Not so fast.

If your entity receives a lawsuit or other legal document, there is no guarantee that the name on the document will be the legal name of the entity. It is critical that the assumed name be shared with your registered agent for legal documents to be properly received. The workflow of most professional registered agents is to check the state to confirm they are, in fact, the registered agent for the entity. If that entity name is not located, many agents will also check their internal database to ascertain whether the document should be received or refused.

While most of us dislike doom and gloom scare tactics, the following is a very real scenario.

  • You have properly registered the assumed name in the county of the state in which you are qualified.
  • The entity, using its assumed name, is served with a summons and complaint (a.k.a service of process) with a 21-day answer date.
  • The service of process is correctly delivered to your registered agent’s address but the registered agent was never notified that the entity was using an assumed name.
  • Your registered agent follows its typical due diligence protocol to identify the name and verify that they are the active registered agent for the entity.
  • A problem arises when the registered agent cannot locate the assumed name at the Secretary of State, since the assumed name is registered only at the county level.
  • Further, they search their internal database and can’t locate the assumed name associated with the entity.
  • As a result, the registered agent cannot verify they are the agent and refuses to receive the service of process.
Pros and cons of Assumed Names - hourglass on calendar - Fotolia_122233041_XSAll the while, time to reply to your answer date is dwindling. If the service of process is eventually delivered, the answer date may have already passed which could leave your company in a precarious position of facing a default judgment.

What now?

Following just a couple of simple extra steps can increase the chance that service of process is delivered properly and minimize the likelihood of it being refused.

  1. Properly register the assumed name with the appropriate state and/or local government agency.
  2. Ensure your registered agent has the assumed name associated with your legal entity. In some cases, there may be a minor fee to house this assumed name. That fee is well worth it to avoid last minute scrambling, or worse, a default judgment.

 At the end of the day, remember the immortal words of W.C. Fields:

“It ain't what they call you,
it's what you answer to.”

This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.

Topics: Company Formation and Filing Considerations, Annual Report Compliance