How to Start an LLC: Step-by-Step Guide

Starting a limited liability company (LLC) is the most popular way to structure a new business in the United States. An LLC combines the limited liability protection of a corporation, shielding your personal assets from business debts and lawsuits, with the tax flexibility and operational simplicity of a sole proprietorship or partnership. In 2025, LLCs accounted for more than 70% of all new business entity filings across the 50 states: they require less paperwork than corporations, offer multiple tax classification options, and impose fewer governance formalities.

This guide walks you through every step of forming an LLC, from choosing a name and designating a registered agent to filing your articles of organization, creating an operating agreement, and obtaining an EIN (Employer Identification Number). Whether you are launching a freelance consulting practice, opening a restaurant, forming a real estate investment company, or structuring a multi-member partnership, the LLC formation process follows the same fundamental steps. The total cost, timeline, and specific requirements vary by state, but the framework outlined here applies everywhere. For the critical document that governs your LLC's internal operations, our guide on LLC operating agreements Covers everything you need to know.

The Federal and State Legal Foundation for an LLC

An LLC is a creature of state statute. Each state's LLC act traces its lineage to the Revised Uniform Limited Liability Company Act (RULLCA) (2006, amended 2013), adopted in some form in roughly 20 states. Major statutes include Delaware's Limited Liability Company Act, 6 Del. C. §§ 18-101 to 18-1208 (the most influential statute and the default choice for many entities); the California Revised Uniform Limited Liability Company Act, Cal. Corp. Code §§ 17701.01-17713.13; the New York Limited Liability Company Law, N.Y. LLC Law §§ 101-1403; and the Texas Business Organizations Code, Tex. Bus. Orgs. Code §§ 101.001-101.621. Federal tax treatment is governed by the "check-the-box" regulations at 26 C.F.R. § 301.7701-3, which permit single-member LLCs to be disregarded for tax purposes and multi-member LLCs to be taxed as partnerships under Subchapter K (26 U.S.C. §§ 701-777) by default, or as corporations under Subchapter C or S by election. Limited-liability protection is qualified by the doctrine of veil-piercing recognized in Kaycee Land & Livestock v. Flahive, 46 P.3d 323 (Wyo. 2002).

The limited liability company was designed to solve a specific problem: traditional business structures forced entrepreneurs to choose between liability protection and operational simplicity. A C corporation provides strong liability protection but requires a board of directors, corporate officers, annual shareholder meetings, and detailed corporate minutes. A sole proprietorship is simple to operate but offers zero liability protection, if your business is sued or cannot pay its debts, your personal bank accounts, home, and other assets are at risk. The LLC eliminates this trade-off by providing corporate-level liability protection with partnership-level simplicity.

The liability protection works through a legal concept called the "corporate veil." When your LLC enters into contracts, takes on debt, or faces litigation, the LLC itself is the liable party, not you personally. If your LLC's delivery truck causes an accident, the injured party can sue the LLC and recover from its assets, but they generally cannot reach your personal savings, your home, or your retirement accounts. This protection is not absolute, courts can "pierce the veil" if you commingle personal and business funds, fail to maintain the LLC as a separate entity, or use the LLC to perpetrate fraud, but for businesses that follow basic formalities, the protection is thorough and reliable.

Tax flexibility is the LLC's other major advantage. By default, a single-member LLC is taxed as a disregarded entity (reported on the owner's personal tax return), and a multi-member LLC is taxed as a partnership. But the IRS allows LLCs to elect different tax classifications. An LLC can elect to be taxed as an S corporation, which can reduce self-employment tax for profitable businesses by allowing the owner to split income between a reasonable salary (subject to payroll tax) and distributions (not subject to payroll tax). An LLC can also elect C corporation status, which may be advantageous for businesses planning to seek venture capital or retain significant earnings at the corporate tax rate.

Every business that operates without an LLC or corporation exposes its owner to unlimited personal liability. Whether you are a consultant, an e-commerce seller, a landlord, or a service provider, forming an LLC is the single most important step you can take to protect your personal assets from business risk.

How Do You Choose a Name for Your LLC?

Choose your LLC name by selecting a unique name that complies with your state's naming requirements, includes the designation "LLC" or "Limited Liability Company," and is distinguishable from every other business entity registered in your state. Most states allow you to check name availability through the Secretary of State's online database.

Every state requires the LLC's legal name to include a designator, either "LLC," "L.L.C.," or "Limited Liability Company." Some states accept additional variations such as "Ltd. Liability Co." The designator puts the public on notice that they are dealing with a limited liability entity rather than a sole proprietorship or general partnership. Operating without the proper designator can jeopardize your liability protection and create confusion in commercial dealings.

The name must be distinguishable from other business entities already registered with the Secretary of State. "Distinguishable" does not mean different, it means that a reasonable person would not confuse your LLC's name with an existing entity's name. Most states' online databases allow you to search for existing registrations before you file. If your preferred name is taken, you can modify it (adding a geographic identifier, a descriptive word, or a different structure) or contact the existing entity to request consent to use a similar name.

A DBA (doing business as) filing, also called a fictitious name, assumed name, or trade name registration, allows your LLC to operate under a different name than its legal name. For example, "Smith Holdings, LLC" might file a DBA to operate as "Main Street Coffee." DBA requirements and filing procedures vary by state and, in some states, by county. A DBA does not create a separate legal entity; it simply registers an additional name under which the LLC conducts business.

Beyond state registration, consider whether the name is available as a domain name and on key social media platforms. You should also check federal trademark availability through the United States Patent and Trademark Office (USPTO), a registered trademark may be protectable nationwide, even if no one has registered the name in your state. A brief trademark search before finalizing your name can prevent costly rebranding later.

How Do You File Articles of Organization?

File articles of organization by submitting the required formation document to your state's Secretary of State (or equivalent agency), paying the state filing fee, and designating a registered agent for service of process. Most states offer online filing with processing times ranging from same-day to two weeks.

The articles of organization (called a "certificate of formation" in some states or "certificate of organization" in others) is the document that legally creates the LLC. It is filed with the state agency responsible for business registrations, typically the Secretary of State, though some states use the Department of Corporations, Division of Revenue, or similar agencies. The document is relatively simple compared to corporate articles of incorporation and typically requires the following information.

The LLC's legal name and principal office address must be stated. The name must comply with the state's naming requirements discussed above. The principal office address is the primary location where the LLC conducts business; it does not need to be the same as the registered agent's address.

The registered agent is a person or company designated to receive legal documents, lawsuits, government notices, and official correspondence, on behalf of the LLC. Every state requires an LLC to maintain a registered agent with a physical address (not a P.O. Box) in the state of formation. The registered agent must be available during normal business hours to accept service of process. You can serve as your own registered agent, appoint a trusted individual, or hire a professional registered agent service. Professional services typically charge $50 to $300 per year and provide the advantage of consistent availability and a professional address that appears on the public record.

Most states ask whether the LLC will be member-managed or manager-managed. In a member-managed LLC, all members participate in day-to-day business decisions. In a manager-managed LLC, one or more designated managers (who may or may not be members) handle operations while passive members function as investors. The choice affects authority, fiduciary duties, and how third parties interact with the LLC.

Some states require additional information in the articles, such as the LLC's purpose, duration, or the names of initial members or managers, while others require only the basics. Filing fees range from $40 (Kentucky) to $500 (Massachusetts), with most states falling in the $50 to $200 range. Processing times vary from instantaneous (online filing in states with automated systems) to several weeks (paper filing in states with manual review processes). Expedited processing is available in most states for an additional fee.

Do You Need an LLC Operating Agreement?

Yes, every LLC needs an operating agreement, even single-member LLCs. The operating agreement defines ownership percentages, member rights and responsibilities, profit and loss allocation, management structure, voting procedures, and dissolution terms. Without one, your LLC is governed by state default rules that may not align with your intentions.

The operating agreement is the LLC's internal governance document, the equivalent of a corporation's bylaws. While only a handful of states legally require an operating agreement (most notably New York and California), having one is essential for every LLC regardless of state requirements. The operating agreement serves three critical functions.

First, it defines the economic arrangement among members. Who contributed what capital? How are profits and losses allocated? When and how are distributions made? Without an operating agreement, state default rules apply, and those rules typically allocate profits equally among members regardless of their capital contributions. A member who invested $100,000 would receive the same profit share as a member who invested $10,000. The operating agreement overrides these defaults with terms that reflect the actual agreement among the members.

Second, the operating agreement establishes the management and decision-making framework. It specifies who has authority to sign contracts, open bank accounts, hire employees, and make financial commitments on behalf of the LLC. It establishes voting thresholds for major decisions, such as admitting new members, taking on debt, selling assets, or dissolving the LLC. Without these provisions, disputes among members about authority and decision-making can paralyze the business.

Third, the operating agreement strengthens the LLC's liability shield. Courts evaluating whether to pierce the corporate veil consider whether the LLC was operated as a legitimate, separate entity. An operating agreement, maintained, followed, and updated, is strong evidence that the members treat the LLC as a distinct entity with its own rules and governance structure. An LLC without an operating agreement looks more like an informal arrangement that may not deserve the liability protection the LLC structure provides.

For single-member LLCs, the operating agreement is equally important. It documents the member's capital contributions, establishes that the LLC is a separate entity from the member, and can specify succession or transfer provisions in case the member becomes incapacitated or dies. Banks, investors, and commercial landlords frequently request a copy of the operating agreement before extending credit, funding, or lease terms to an LLC. Legal Tank's LLC operating agreement generator Creates customized agreements for both single-member and multi-member LLCs, or you can download the LLC operating agreement template To review the standard provisions.

How Do You Get an EIN for Your LLC?

Get an EIN by applying online through the IRS website (irs.gov), which issues the number immediately upon completion of the application. The process is free, takes approximately 10 minutes, and is required for any LLC that has employees, has multiple members, or elects corporate tax treatment.

An EIN (Employer Identification Number), also called a Federal Tax Identification Number, is a nine-digit number assigned by the Internal Revenue Service to identify your LLC for tax purposes. It functions as the business equivalent of a Social Security number. While single-member LLCs without employees are not technically required to obtain an EIN (they can use the owner's Social Security number for tax filings), obtaining one is strongly recommended for every LLC.

The practical reasons for obtaining an EIN go beyond tax filing. Banks require an EIN to open a business bank account, which is essential for maintaining the separation between personal and business finances that supports the LLC's liability protection. Payment processors, vendors, and clients may require an EIN for tax reporting purposes (they need it to issue 1099 forms for payments made to your LLC). State tax agencies use the federal EIN as a reference number for state tax registrations. And using an EIN instead of your Social Security number on business documents reduces the risk of identity theft.

The IRS online application asks for basic information: the LLC's legal name, address, responsible party, number of members, formation date, and primary business activity. For most LLCs, the application takes less than 10 minutes, and the EIN is assigned immediately upon submission. You can download the confirmation letter (CP 575) right away and use the EIN to open bank accounts and complete state tax registrations.

If your LLC hires employees, the EIN is mandatory, it is used to report employment taxes, withhold income taxes, and file employment tax returns (Forms 941, 940, and W-2s). Multi-member LLCs must file a partnership tax return (Form 1065), which also requires an EIN. And any LLC that elects to be taxed as an S corporation or C corporation must obtain an EIN for the entity's corporate tax return. For LLCs that will hire contractors rather than employees, understanding the distinction between the two classifications is essential, our guide on independent contractor agreements Explains how to structure contractor relationships properly.

How Much Does It Cost to Start an LLC?

Starting an LLC costs between $50 and $500 in state filing fees alone, with most states charging $50 to $200. Total first-year costs, including the filing fee, registered agent service, operating agreement, EIN (free), business license, and any required publications, typically range from $100 to $1,000 depending on the state.

The state filing fee for articles of organization is the only mandatory cost of forming an LLC. This fee varies significantly by state. States with the lowest fees include Kentucky ($40), Colorado ($50), Michigan ($50), and Arizona ($50). States with higher fees include Massachusetts ($500), Tennessee ($300 per member with a $50 minimum), Illinois ($150), and Texas ($300). California imposes an $800 annual franchise tax on all LLCs regardless of revenue, making it one of the most expensive states for LLC formation and maintenance. Note that these fees change periodically, so verify the current amount with your state's Secretary of State before filing.

A registered agent service adds $50 to $300 per year. While you can serve as your own registered agent (saving this cost), hiring a professional service ensures that legal documents are received reliably and keeps your personal address off the public record. For most business owners, the cost of a registered agent service is a worthwhile investment in privacy and reliability.

An operating agreement can be drafted by an attorney (typically $500 to $2,000), generated through a legal document service like Legal Tank, or created using a template. An EIN is free from the IRS. Business licenses and permits vary dramatically by location and industry, a home-based consulting business may need only a basic business license ($50 to $100), while a restaurant may require a food service permit, liquor license, health department inspection, and signage permit, with combined costs exceeding several thousand dollars.

Several states require LLCs to publish a notice of formation in local newspapers. New York is the most notable example, where the publication requirement can cost $200 to $2,000 depending on the county.

Ongoing annual costs include the annual report filing (required in most states, typically $25 to $100), the registered agent fee, franchise taxes (in states that impose them), and business license renewals. Total ongoing costs for a simple LLC typically range from $100 to $800 per year, excluding state-specific franchise taxes. To protect sensitive business information as your LLC begins operations, consider using a what an NDA is and how it works When sharing proprietary details with potential partners, contractors, or investors.

What Are the Tax Options for an LLC?

An LLC can be taxed as a disregarded entity, partnership, S corporation, or C corporation. The default is pass-through taxation (disregarded entity for single-member LLCs, partnership for multi-member LLCs), but LLCs can elect S corp or C corp status by filing IRS Form 2553 or Form 8832 respectively.

The LLC's default tax treatment depends on how many members it has. A single-member LLC is treated as a "disregarded entity", it does not file a separate tax return. Instead, all income and expenses are reported on the owner's personal tax return (Schedule C of Form 1040). The LLC's income is subject to both income tax and self-employment tax (15.3% for Social Security and Medicare). This is the simplest tax structure and requires no additional filings beyond the owner's personal return.

A multi-member LLC is treated as a partnership by default. The LLC files an informational partnership return (Form 1065) and issues Schedule K-1 to each member, reporting their share of income, deductions, and credits. Each member then reports their K-1 income on their personal tax return. Like single-member LLCs, partnership income is subject to self-employment tax for members who actively participate in the business. The operating agreement determines how profits and losses are allocated among members, which is another reason why having a comprehensive operating agreement is essential.

The S corporation election is one of the most powerful tax planning tools available to LLC owners. By filing IRS Form 2553, an LLC elects to be taxed as an S corporation while retaining its LLC legal structure. The key benefit is the ability to split income into two categories: a reasonable salary (subject to payroll tax, including the employer's share of Social Security and Medicare) and distributions (subject to income tax but not self-employment or payroll tax). For profitable LLCs where the owner's income exceeds a reasonable salary, the S corp election can save thousands of dollars annually in self-employment tax. The election must be filed within 75 days of the beginning of the tax year in which it is to take effect.

The C corporation election, made by filing IRS Form 8832, subjects the LLC to corporate income tax on its earnings. Distributions to members are then taxed again as dividends on the member's personal return, creating the "double taxation" that makes C corps less attractive for most small businesses. However, C corp status may be advantageous for businesses that plan to reinvest most earnings in the business (taking advantage of the 21% corporate tax rate rather than higher individual rates), seek venture capital (VCs typically require C corp structure), or intend to go public eventually.

Choosing the right tax classification depends on your LLC's profitability, the owner's other income, the business's growth trajectory, and long-term exit plans. Consult with a tax professional to model the after-tax results under each classification before making an election. Once you have formed your LLC and selected your tax treatment, you will need contracts in place before taking on clients or customers. A well-drafted service agreement Protects your LLC in every client engagement, while a bill of sale Documents the purchase or sale of business assets as your LLC grows.

If your LLC has a website, you will also need to ensure compliance with data privacy regulations. Our guide on whether your website needs a privacy policy Covers GDPR, CCPA, and COPPA requirements.

Federal Tax and Multistate Compliance for LLCs

Beyond formation, every LLC must navigate federal tax and multistate operating compliance. Under 26 C.F.R. § 301.7701-3 (the check-the-box regulations), a multi-member LLC is a partnership by default under Subchapter K (26 U.S.C. §§ 701-777), while a single-member LLC is disregarded under Treas. Reg. § 301.7701-2(c)(2). Election to be taxed as a corporation requires Form 8832; S-corp election requires Form 2553 (26 U.S.C. § 1362). Self-employment tax under 26 U.S.C. §§ 1401-1402 hits LLC members on guaranteed payments and distributive-share income unless the limited-partner exception of § 1402(a)(13) applies, as analyzed in Renkemeyer, Campbell & Weaver, LLP v. Commissioner, 136 T.C. 137 (2011). Multistate operations trigger nexus rules under South Dakota v. Wayfair, 138 S. Ct. 2080 (2018), and Public Law 86-272 (15 U.S.C. §§ 381-384). Foreign-qualification statutes (Cal. Corp. Code § 17708.02; Tex. Bus. Orgs. Code § 9.001; Del. Code tit. 6, § 18-902; N.Y. LLC Law § 802) require registration in any state where the LLC transacts business.

Series LLCs under Del. Code tit. 6, § 18-215, Tex. Bus. Orgs. Code § 101.601, and Ill. Comp. Stat. 805 ILCS 180/37-40 permit cell-style asset segregation. Conversion and domestication under Cal. Corp. Code §§ 1150-1160 and Del. Code tit. 6, § 18-216 allow entity-form changes. The Corporate Transparency Act (31 U.S.C. § 5336 and 31 C.F.R. § 1010.380) requires beneficial-ownership reporting to FinCEN unless the LLC qualifies for an exemption. Federal employer identification number rules at 26 U.S.C. § 6109. Operating-agreement enforceability is broadest under Del. Code tit. 6, § 18-1101 (contract-primacy). Charging-order remedies under Cal. Corp. Code § 17705.03 and N.Y. LLC Law § 607 limit creditor reach.

Choice-of-entity comparisons: subchapter S election under 26 U.S.C. § 1362; subchapter C taxation under 26 U.S.C. § 11; partnership taxation under Subchapter K (26 U.S.C. §§ 701-777). Limited-partnership conversion under Cal. Corp. Code § 15911.01, Tex. Bus. Orgs. Code § 10.101, and Del. Code tit. 6, § 17-216. Federal employer identification number rules at 26 U.S.C. § 6109. The Internal Revenue Manual 4.20.1 governs LLC examinations. Restatement (Third) of Agency §§ 1.01-1.04 supplies general agency principles applied to LLC managers.

Frequently Asked Questions

How much does it usually cost to get an LLC?

State filing fees range from $50 (Kentucky) to $500 (Massachusetts), with most states between $100 and $200. Annual fees and franchise taxes vary widely: California charges an $800 minimum franchise tax annually (the highest); Delaware charges $300 annual franchise tax; Wyoming and South Dakota charge $50 to $60 with no income tax. Registered agent service runs $50 to $300 per year if you do not act as your own. Attorney-drafted operating agreements cost $400 to $1,500.

Can I set up an LLC by myself?

Yes. File the Articles of Organization (sometimes called Certificate of Formation) with your state's secretary of state online, designate a registered agent (yourself if you have a physical address in the state), obtain an EIN free from the IRS at IRS.gov, draft an operating agreement, open a business bank account with the EIN and Articles, and register for state tax accounts if applicable. Most filings clear in 7 to 14 business days; expedited processing is available in most states for an additional $50 to $250.

How quickly can you set up an LLC?

Online filings clear in 1 to 14 business days in most states; mailed filings take 4 to 8 weeks. Same-day expedited processing is available in Delaware, California, Texas, Florida, and several other states for $50 to $300. Total setup including EIN issuance, operating agreement drafting, and bank account opening typically takes 2 to 4 weeks. EIN application via IRS Form SS-4 online returns the EIN immediately for domestic applicants.

What is the point of a registered agent for an LLC?

Every state requires LLCs to designate a registered agent with a physical street address (not a PO box) in the state of formation, available during business hours to receive service of process, IRS notices, and state correspondence. The owner can serve as agent if they live in the state. Commercial registered-agent services cost $50 to $300 per year and provide privacy (the agent's address appears on public filings rather than yours), mail forwarding, and compliance reminders that catch missed filings before the LLC is administratively dissolved.

What is the downside of starting an LLC?

Annual state fees that vary widely (California's $800 minimum franchise tax is the highest; Delaware $300; New York biennial report $9 plus a one-time publication requirement of $1,000 to $2,000), self-employment tax on all member income unless an S-corp election is filed (Form 2553), pass-through state tax filings in every state where the LLC has nexus, no automatic perpetual existence in some states without explicit operating agreement language, and the formality cost of separating personal and business finances to preserve the liability shield.