What should you name your business?
The first step to forming your LLC is to choose a name. Whether you have the perfect name or are still thinking about it, there are a few Texas LLC naming requirements you must follow.
First, ensure your LLC name abides by the naming rules listed in the Texas Administrative Code on the Secretary of State’s website. Below is a simplified list of what cannot be in your LLC’s name.
You can use “Frisco,” in your business name, but keep in mind your business name cannot imply government affiliation. Avoid using phrases like “city of Frisco,” or “of Frisco,” in your business name. To confirm your business name is okay, you can reach out to the City of Frisco business division directly.
Your LLC’s name must also contain the phrase “limited liability company”, “limited company”, or an abbreviation of one of these two phases, like LLC, LC, or Ltd. Co. This is typically added to the end of the business name.
Your business name also must be unique from other businesses in Texas. The simplest and cheapest way to check for businesses with similar names is with the Taxable Entity Search tool from the Texas Comptroller of Public Accounts. Use several varied searches to make sure your name is all clear.
Finally, if your LLC name implies having a professional license, be sure you and/or other business members have the correct licensure and permissions from the governing state entity.
Having trouble choosing a name for your LLC?
We recommend just settling on one you like. Once you name your business, you can apply for an assumed name, also known as a DBA. DBAs are very common and allow you to conduct business for your company under a different name.
What is a Registered Agent? A registered agent is an individual or entity who receives Service of Process on behalf of a business. (Service of Process is the legal term for documents the court sends out when a business is being sued.) Registered agents also receive any other government-issued documents on behalf of the business.
They function as a representative for your business.
As a part of forming a business in Texas, you must appoint someone as your LLC’s registered agent.
So who do you assign to this essential role?
You may think about assigning yourself as your LLC’s agent because:
There are some challenges to being your own registered agent, though, such as:
If you’re worried about any of the above points, hiring a registered agent service may be the answer. These services use their office address to receive Service of Process and any other government documents. They then organize these documents and share them with you, noting what requires action.
Their role is to make sure you don’t miss important notices, which is helpful if you have a busy role within your business as is.
Registered agent services are also low-cost, ranging from $100-150 per year. Agent services provided by attorneys can cost up to $500 per year.
If you choose to start your LLC by using a business formation company, they often include a registered agent service in their packages. Feel free to take a look at our registered agent recommendations article for more information.
What is a certificate of formation?
A certificate of formation is the document you must fill out and submit to the state to create your LLC. After this document is filed, you can begin doing business under your LLC.
Although there are other filing options, including mail, fax, and SOSUpload, processing time goes up with each of these options.
Even expedited filing sent through fax or mail has a processing time of 12-14 business days. There are no expedited filing options available through SOSDirect or SOSUpload.
Once your certificate of formation is processed, the Secretary of State’s office will send a confirmation of the filing. This is all you need to prove that your LLC exists and that it can do business.
To save time and avoid the hassle of LLC filings, all seasoned entrepreneurs use LLC formation services. For recommendations, check out our article on the best LLC services.
An Operating Agreement (also known as a company agreement) is a contract between LLC members that sets the rules under which the LLC operates, and the rights and duties of each member.
You are not required to have an Operating Agreement by Texas law, but should consider whether it’s right for you.
Operating Agreements are private contracts between business members, not between the business and the state. They allow you to set rules for your business that members must agree to and follow.
What can go in an Operating Agreement?
If you do not create an Operating Agreement, you leave decisions up to state law and the court, which may not reflect your wishes for your business.
Drafting an Operating Agreement does not need to be complicated. You can check out our article on best LLC services to find services that can provide an Operating Agreement template for as low as $50.
EINs are like social security numbers, but for a business. They are assigned to a business by the IRS for taxation purposes.
Not all businesses are required to get an EIN. Three cases where it would be required, however, are if:
While you are only required to get an EIN in the above cases, note that most banks will ask for an EIN to open a business bank account.
How do you get an EIN in Texas?
Since the application process is fast and easy, you should never pay to file an EIN unless it is a part of a larger LLC formation package.
Depending on the type of business you own, you may require special licenses or permits at the state or city level before you can officially begin doing business.
There are no general business licenses or permits required at the state level. Some businesses need professional licensing or regulation. Some examples include doctors, lawyers, and plumbers.
To confirm whether your business has professional licensing needs, you can check with the Texas Department of Licensing and Regulation.
Like at the state level, there are no general business licenses or permits required to do business in Frisco.
Some businesses do require special permits, however. Companies handling food or alcohol, for example, require specific permits.
You can learn if your business requires additional permits by visiting the City of Frisco website or by contacting your local business department.
When forming your business, it’s a great idea to take advantage of the local resources for small businesses in Frisco. Not only can this be financially helpful, but it can also help you expand your skills, network with other business owners, and discover new opportunities for your business.
After you form your business, there are just a few more things to keep in mind to optimize your business. These steps are not required but can be useful and prevent future headaches.
Whether your LLC has a large online presence or a small one, you will likely need a website for your business.
We recommend registering the online domain name matching your business sooner rather than later to prevent domain squatters from snatching it up.
Domain squatters are folks who look out for newly registered businesses to purchase their matching domain name. They then resell the domain at a much higher price to the business owner.
Getting a domain name with GoDaddy.com or a similar registrar is fairly simple and costs about $20-50 per year. You can also create a branded email address through GoDaddy after getting your domain name.
As mentioned, businesses can operate under a name different from their legal name. This is called a DBA, or assumed name.
You may want a DBA to distinguish your business from others by adding your name, “Frisco”, or “of Frisco”. For example, if your official business name is “Fast HVAC”, you may want a DBA so you can work as “Fast HVAC Frisco”.
What do you need for a DBA?
When you apply for an assumed name with the Secretary of State’s office, your certificate should contain:
The fee for an assumed name certificate filed with the Secretary of State is $25.
All Texas businesses are required to file an annual report with the comptroller about their franchise tax, called the Public Information Report (PIR). The franchise tax is based on the “net surplus” of the business, a number that can be roughly described as the assets of the business minus members’ contributions.
Details and instructions for filing this report can be found on the comptroller website.
Most importantly, having an LLC will ensure your personal assets are protected if your business cannot pay its debts. Running your business through an LLC can also provide you with better tax treatment. In addition, LLCs have fewer and less complicated reporting requirements compared to other types of businesses, making them particularly suitable for smaller businesses.
It is not strictly necessary to form an LLC in order to start a business. You can engage in business as a sole proprietorship instead. However, in that case, your personal assets may be at risk if your business takes on too much debt or loses a lawsuit in court.
It doesn’t cost much to set up an LLC for your business. In most states, you will need to pay less than $150 to register your new LLC with the local state authorities. In some states, you may need to pay some additional costs later on, for example, when filing an annual report or filing for a DBA.
The time it takes to have your LLC approved can vary wildly depending on the state, the filing method you used and if you opted for expedited filing. In some states, you can have your LLC approved in as little as one day, while in others, it may take weeks or even months.
If you want the fastest possible turnaround time, you should consider using online filing and pay for expedited service, if available.
The IRS and most state tax authorities treat LLCs as “pass-through” entities. This means that your LLC does not pay taxes directly (as corporations do). Instead, the tax burden is passed through to the members of your LLC. The members will then include profits and losses from the LLC’s business on their personal income tax returns.
It is generally best to form your LLC in your home state, where you will actually carry out your business. Some people believe that it is advantageous to form your LLC in Delaware or Nevada. In reality, you would then have to register with the authorities in your home state as a foreign LLC and pay additional fees – without much benefit in return.
You are not generally required to file for a DBA (“Doing-Business-As”). However, most business owners choose to do so anyway. Getting a DBA will allow you to omit the letters LLC from your customer-facing business name. You can also have multiple names for your LLC if you want to run more than one business through your LLC.
Yes, you can form an LLC for your business in any US state. There is no requirement for you to be a US citizen in order to form an LLC, nor do you need the right to reside in the US. If your business is going to own physical property in a given state, you may want to form your LLC in that state.
No, you don’t need to hire an attorney to form an LLC for you. It is generally much cheaper and straightforward to file the necessary paperwork yourself or to hire an affordable LLC formation service to handle the work on your behalf. However, you may want to consider hiring an attorney if your business is very complex.