The Odd Case Of The Unformed Applicant And The Non-Complying Name Holder

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Suppose you are forming an LLC and have even settled on the perfect name.  Alas, the Secretary of State’s office refuses to file the articles of organization because your perfect name is so perfect that someone has already bestowed it on an LLC.  Although people can, and do, have the exact same name, the legislature simply won’t tolerate it when it comes to LLCs.  Cal. Corp. Code § 17701.08(b).

California’s new Revised Uniform Limited Liability Company Act (CRULLCA) provides one possible solution:

A limited liability company may apply to the Secretary of State for authorization to use a name that does not comply with subdivision (b). The Secretary of State shall authorize use of the name applied for if, as to each noncomplying name, either of the following applies:

(1) The present user, registrant, or owner of the noncomplying name consents in a signed record to the use and submits an undertaking in a form satisfactory to the Secretary of State to change the noncomplying name to a name that complies with subdivision (b) and is distinguishable in the records of the Secretary of State from the name applied for.

(2) The applicant delivers to the Secretary of State a certified copy of the final judgment of a court establishing the applicant’s right to use in this state the name applied for.

Cal. Corp. Code § 17701.13(c).   Supposing the existing LLC is willing to give it’s consent and undertake to change its name, can you proceed?  That certainly seems to be the intent of the statute.  But “you” aren’t the person that is the subject of the statute.  The statute states “a limited liability company may apply”.  The term “limited liability company” is defined in the CRULLCA as an entity formed under the CRULLCA.  Cal. Corp. Code § 17701.02(k).  Since an LLC is not formed until the articles of organization are filed with the Secretary of State, the statute creates an classic “Catch-22?: an application to use a name can only be filed by an LLC that has been formed, but the LLC can’t be formed with the desired name unless it first submits the application.

One response may be that you are the “organizer” and thus entitled to submit an application.  Leaving aside the fact that the statute doesn’t mention organizers, how do you know that you’re the organizer?  The CRULLCA defines “organizer” as “a person that acts under Section 17702.01 to form a limited liability company”.  Cal. Corp. Code § 17701.02(u).  Therefore, until you take the acts specified in Section 17702.01 (sign the articles of organization and deliver them to the Secretary of State), you haven’t established yourself as the organizer.

Another statutory curiosity is the reference to the preexisting name holder as the “user, registrant, or owner of the noncompliant name”.  However, that person’s name is compliant because the Secretary of State has previously accepted it.  You (whoever you may be) are the person who is trying to file under a noncompliant name.

 

Topics:  Choice of Entity, LLC, Startups

Published In: Business Organization Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Allen Matkins Leck Gamble Mallory & Natsis LLP | Attorney Advertising

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