How to start your LLC in Frisco, TX

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.

• Any words that might make people think your company is part of a government
• Any words implying that your LLC is doing something illegal
• “Grossly offensive” words
• “Olympic” or similar words
• “Bank” or similar words
• “College” or similar words
• “Veteran,” “Disabled,” “Spanish,” or similar words if the name implies that the entity is for the benefit of war veterans and their families
• “Lotto” or “lottery”

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:

• It’s cheap: You don’t have to worry about any additional costs to you.
• It’s simple: If your business and agent address is the same, you’ll only have one address to keep updated.
• It’s reliable: You will personally receive all important documents regarding your business, so nothing should go missed by you. You also maintain full confidentiality.

There are some challenges to being your own registered agent, though, such as:

• No privacy: Registered agent addresses are publicly available on the Comptroller’s and Secretary of State’s websites. If you are using your home address, this presents privacy concerns.
• Junk mail/spam: You can expect more junk mail, as public-facing addresses tend to receive more of it.
• No breaks:  Agents must be at their registered address during regular business hours. This means you can’t be out of the office during the week from 8am-5pm.
• Business interruptions: You can expect some of your days to be held up by your duties as an agent. Also, if your agency address is the same as your business address, being served a lawsuit in front of customers or employees is possible. This could create negative opinions of your business.
• It’s your fault if you miss something: Tax and legal documents need timely handling to avoid falling into bad standing or facing fees and penalties. If you make a mistake or forget something, you will be liable.

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.

The following should be in your certificate of formation to abide by Texas Business Organizations Code section 3.005:

• The name of your LLC
• The purpose of your LLC (which can be stated as “any lawful purpose”)
• How long your LLC should exist, if it is temporary
• The registered address of your LLC
• The name and address of your registered agent
• The name and address of each person forming the LLC

The simplest and quickest way to file your certificate of formation is by using SOSDirect. There, you can upload all of your LLC’s info and pay the $300 required filing fee.

The normal processing time when you file through SOSDirect is 10-12 business days.

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?

• They determine the rights and duties of LLC members. If one LLC member is responsible for running the business or managing the books, the operating agreement should say so.
• They say whether the LLC has a member or non-member manager and what the manager has the right to do. Managers also have special duties to the company and the members. The operating agreement should state these.
• They outline what the LLC is legally able to do. The operating agreement should also set down how the company is allowed to conduct its business from day to day.
• They say how new members can join the company. They also have rules about how exiting members can leave.
• They set down how and when profits are paid to members. They can also create different types of membership and payment schemes.
• They say whether members or managers are in charge. They also say how to hire and fire managers.
• They say how and under what circumstances the LLC should end. You might not want to dissolve your business now, but you might in the future. It’s best to think about it and plan before it becomes an issue.
• They say how to change the rules. You may need to amend your operating agreement in the future. The operating agreement should set down the rules for making changes.

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:

• Your LLC has more than one member
• Your LLC has any employees
• Your LLC is taxed as a C corporation or S corporation

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?

You can apply for an EIN online on the IRS website in as quickly as 5 minutes. If you prefer, you can also apply for an EIN via mail or fax using IRS form SS-4.

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.

Read More: How to Get an Employer Identification Number in Texas