How to Start an LLC in 8 Steps
Choose a state, file Articles of Organization, get a free EIN, and stay compliant.
In this article
Why form an LLC?
A limited liability company (LLC) is a business entity set up under state law. Its main appeal is limited liability: in general, the company's debts and lawsuits belong to the LLC, not to you personally, so your house and savings are better protected than they would be as a sole proprietor. LLCs are also simple to run, and by default they're taxed like a sole proprietorship or partnership, so profits pass through to your personal return.
Limited liability isn't absolute. You're still personally responsible for your own professional mistakes and anything you personally guarantee, like many business loans and leases. And if you mix personal and business money, a court can disregard the LLC. That's why the bank account step below matters.
How to start an LLC in 8 steps
1. Choose your state
Form your LLC in the state where you actually do business. Forming in Delaware or Wyoming to save money rarely helps a small business, because you'll usually also have to register in your home state as a "foreign LLC" and pay both states' fees.
2. Pick a name and check it's available
Search your state's business name database. Most states require the name to include "LLC" or "Limited Liability Company" and to be distinguishable from existing businesses. Check that the domain name and social handles are free too, and do a quick trademark search so you don't build a brand you'll have to change.
3. Appoint a registered agent
Every LLC needs a registered agent with a physical address in the state to receive legal papers. You can be your own agent if you have an in-state address and are available during business hours, or pay a registered agent service.
4. File Articles of Organization
File with your Secretary of State (the form name varies; some states call it a Certificate of Formation). Most states let you file online. Filing fees vary widely by state, from under $50 to $500.
5. Write an operating agreement
An operating agreement sets out who owns the LLC, how decisions are made, and what happens if an owner leaves. Only a few states require one, but you should have one even as a single-member LLC: it supports the separation between you and the business, and banks often ask for it.
6. Get an EIN from the IRS
An Employer Identification Number is your business's federal tax ID. You'll need one to hire employees or if your LLC has more than one member, and banks usually ask for one. It's free and you can apply online at IRS.gov. Be wary of websites that charge for this.
7. Open a business bank account
Run every business dollar through a separate account. It protects your limited liability, makes bookkeeping far easier, and looks more professional to clients paying your invoices.
8. Get licenses, permits and tax registrations
Depending on your city, county, state and industry you may need a general business license, professional licenses, a sales tax permit if you sell taxable goods, and state payroll registrations if you hire. Your state's small business portal and your city's website are the places to start.
Once you're set up, make your first invoice and business cards with your new LLC name and logo.
Make business cardsHow an LLC is taxed
- Single-member LLC: by default treated as a "disregarded entity." You report profit on Schedule C of your personal return and pay self-employment tax on it, just like a sole proprietor.
- Multi-member LLC: by default taxed as a partnership. The LLC files Form 1065 and each member gets a Schedule K-1.
- S corporation election: an LLC can elect S corp tax treatment (Form 2553). Owners who work in the business then take a reasonable salary through payroll, and remaining profit isn't subject to self-employment tax. It can save money once profits are substantial, but it adds payroll costs and paperwork, so get advice first.
Ongoing requirements
Forming the LLC is only the start. Most states require an annual or biennial report with a fee, and some charge an annual tax regardless of income. California, for example, charges LLCs an $800 annual franchise tax. Put renewal dates on your calendar, keep your registered agent current, and keep business and personal finances separate.
Frequently asked questions
How much does it cost to start an LLC?
The main cost is your state's filing fee, which ranges from under $50 to $500 depending on the state. Add any annual report fees, business licenses, and optional costs like a registered agent service. An EIN from the IRS is free.
Do I need an LLC to start a business?
No. You can operate as a sole proprietor under your own name with no state filing. An LLC adds liability protection and credibility, which matters more as you take on clients, contracts and risk.
Should I form my LLC in Delaware or Wyoming?
Usually not, for a small business. If you operate in your home state, you'll typically have to register there anyway, paying fees in two states. Delaware mainly makes sense for startups planning to raise venture capital, which usually form a corporation.
How long does it take to form an LLC?
Online filings are often approved within a few business days, though some states take a few weeks. Many states offer expedited processing for an extra fee.
This article is general information for US readers, not legal, tax or financial advice. Rules, prices and platform policies change, so confirm details with official sources or a qualified professional.