How to start an LLC

Published Friday 15 May 2026

Table of contents

• What is an LLC?
• Why start an LLC?
• Types of LLCs
• How much does it cost to start an LLC?
• How to start an LLC in nine steps
• State-specific LLC formation details
• Maintaining your LLC: ongoing requirements
• LLC vs. other business structures
• Tips for starting your LLC
• Manage your LLC finances with confidence
• FAQs on starting an LLC

Key takeaways

• An LLC protects your personal assets from business debts and lawsuits while giving you flexibility in how the business is taxed and managed.
• Filing fees range from $40 to $500 depending on your state, with additional costs for a registered agent, operating agreement, and annual compliance fees.
• You can form an LLC in 9 steps, starting with choosing a state and ending with registering in any additional states where you do business.
• Ongoing maintenance matters. Most states require annual reports, franchise taxes, or both to keep your LLC in good standing.

What is an LLC?

A limited liability company (LLC) is a business structure that separates your personal finances from your business obligations. If your LLC takes on debt or faces a lawsuit, your personal assets (like your home, car, and savings) are generally protected.

LLCs combine the liability protection of a corporation with the simplicity and tax benefits of a partnership or sole proprietorship. They're one of the most popular structures for small businesses in the United States. You can learn more in this guide on what is an LLC.

Why start an LLC?

There are several reasons the LLC is one of the most popular business structures in the US. Here's what makes it stand out.

• Liability protection: Your personal assets stay separate from your business. If the LLC faces a debt or legal claim, creditors typically can't come after your personal bank account or property.
• Tax flexibility: By default, LLCs use pass-through taxation, meaning profits and losses flow directly to your personal tax return. You can also elect to be taxed as an S corporation, which may reduce self-employment taxes as your income grows.
• Fewer formalities: Unlike corporations, LLCs don't require a board of directors, annual shareholder meetings, or detailed corporate minutes.
• Ownership options: LLCs can have 1 owner or 100. There are no restrictions on who can be a member, including individuals, other LLCs, corporations, and foreign nationals.
• Credibility with lenders and partners: Operating as an LLC signals that your business is a formal, registered entity. This can make it easier to open a business bank account, apply for loans, and sign contracts.

Types of LLCs

Not all LLCs are the same. The type you choose depends on your ownership structure, industry, and business goals.

Single-member LLC

A single-member LLC has 1 owner. It's the simplest LLC structure and is a popular choice for freelancers, consultants, and solo entrepreneurs. The IRS treats it as a disregarded entity by default, which means you report business income on your personal tax return using Schedule C.

Multi-member LLC

A multi-member LLC has 2 or more owners. The IRS taxes it as a partnership by default, so each member reports their share of profits and losses on their personal return. A solid operating agreement is essential for multi-member LLCs to define each member's rights, responsibilities, and profit-sharing terms.

Series LLC

A series LLC lets you create separate "series" or divisions within a single LLC. Each series can hold its own assets, liabilities, and members. This structure is useful for real estate investors or businesses with multiple product lines. Not all states recognize series LLCs, so check your state's rules before choosing this option.

Professional LLC (PLLC)

A professional LLC is designed for licensed professionals like doctors, lawyers, accountants, and architects. Some states require professionals to form a PLLC instead of a standard LLC. The structure works the same way, but all members must hold valid professional licenses.

How much does it cost to start an LLC?

The total cost of forming an LLC depends on your state and the services you use. Here's a breakdown of the common expenses.

Required costs:

• State filing fees: Range from $40 to $500 depending on the state. Kentucky and Arkansas are among the cheapest at $40, while Massachusetts charges $500.
• Registered agent fees: If you hire a professional registered agent, expect to pay $100 to $300 per year.
• Operating agreement: Free if you draft it yourself using a template. A lawyer may charge $500 to $2,000 for a custom agreement.

Optional costs:

• Name reservation: $10 to $50 in most states if you want to reserve your business name before filing.
• DBA filing (doing business as): $10 to $100 if you plan to operate under a name different from your LLC's legal name.
• Business licenses and permits: Vary widely depending on your industry and location, from $50 to several hundred dollars.
• EIN (employer identification number): Free from the IRS.

Annual costs:

• Annual report fees: $25 to $300 per year depending on the state.
• Franchise tax: Some states charge an annual franchise tax. California's, for example, is $800 per year.
• Registered agent renewal: $100 to $300 per year if using a professional service.

How to start an LLC in nine steps

Forming an LLC involves a series of steps that vary slightly by state. Here's the process from start to finish.

1. Choose your LLC's home state

Most small business owners should form their LLC in the state where they live and operate. Forming in another state (like Delaware or Wyoming) sounds appealing, but it typically means registering in your home state as well, which doubles your fees and compliance obligations.

If your business operates in multiple states, you'll need to consider which state offers the best combination of fees, taxes, and regulations for your primary operations.

2. Pick a name

Your LLC name must be unique within your state and typically must include "LLC" or "Limited Liability Company." Check your state's Secretary of State website to search existing business names.

Choose a name that's easy to spell, memorable, and relevant to your business. Avoid names that are too similar to existing businesses, government agencies, or restricted terms like "bank" or "insurance" (which may require additional licensing).

3. Check for trademarks

Before you commit to a name, search the US Patent and Trademark Office database to make sure your desired name doesn't infringe on an existing trademark. Even if a name is available in your state, a federal trademark could create legal problems.

You can search trademarks for free at the USPTO website. This step can save you from a costly rebrand later.

4. Designate a registered agent

Every LLC needs a registered agent, which is a person or company authorized to receive legal documents and official notices on behalf of your business. Your registered agent must have a physical address (not a P.O. box) in the state where your LLC is registered.

You can serve as your own registered agent, but many business owners prefer to hire a professional service for privacy and convenience.

5. Register the LLC and file articles of organization

Filing your articles of organization (called a certificate of formation in some states) with the Secretary of State officially creates your LLC. This document typically includes your LLC name, registered agent information, business address, and the names of members or managers.

Most states offer online filing, which is usually faster and sometimes cheaper than filing by mail. Processing times range from a few business days to several weeks.

6. Get an EIN

An employer identification number (EIN) is like a Social Security number for your business. You need an EIN to open a business bank account, hire employees, and file business taxes.

You can apply for an EIN for free on the IRS website. The online application takes about 5 minutes and provides your EIN immediately.

7. Draft an operating agreement

An operating agreement is a legal document that outlines how your LLC will be managed, how profits and losses are shared, and what happens if a member leaves or the business dissolves. Think of it as the rulebook for your LLC.

Even if your state doesn't require an operating agreement, having one is strongly recommended. It protects your limited liability status and prevents disputes among members. The following states require an operating agreement by law: California, Delaware, Maine, Missouri, and New York.

Your operating agreement should cover these key areas:

• Ownership percentages: Each member's share of the business
• Profit and loss distribution: How earnings and losses are divided among members
• Voting rights and decision-making: How major business decisions are made
• Management structure: Whether the LLC is member-managed (all owners participate in daily operations) or manager-managed (1 or more designated managers run the business)
• Transfer of membership interests: Rules for selling or transferring ownership stakes
• Dissolution procedures: Steps for closing the LLC if needed

For a single-member LLC, a template-based operating agreement may be sufficient. You can find resources to help structure your agreement in this guide on LLC operating agreements. For multi-member LLCs, especially those with complex ownership or management arrangements, hiring an attorney to draft a custom agreement is a worthwhile investment.

8. Open a business bank account

Keeping your personal and business finances separate is essential for maintaining your LLC's liability protection. A dedicated business bank account also simplifies bookkeeping and tax filing.

To open a business bank account, you'll typically need your articles of organization, EIN, operating agreement, and a government-issued ID. Compare fees, minimum balance requirements, and features across several banks before choosing one.

9. Register in other states (if necessary)

If your LLC does business in states other than your home state, you'll likely need to register as a foreign LLC in each of those states. "Doing business" generally means having a physical office, employees, or significant sales in that state.

Foreign LLC registration involves filing paperwork and paying fees in each additional state. You'll also need a registered agent in every state where you register.

State-specific LLC formation details

LLC costs and requirements vary significantly from state to state. Here's a look at how some of the most popular states compare.

Filing fees and processing times by state

Each state sets its own filing fee and timeline for processing LLC formations.

• Alabama: $208 filing fee; processing in 3 to 5 business days
• California: $70 filing fee; processing in 5 to 7 business days; $800 annual franchise tax
• Delaware: $90 filing fee; processing in 3 to 5 weeks (expedited options available)
• Florida: $125 filing fee; processing in 5 to 7 business days
• Illinois: $150 filing fee; processing in 5 to 10 business days
• Nevada: $75 filing fee plus $150 business license fee; processing in 3 to 4 weeks
• New York: $200 filing fee; processing in 5 to 7 business days; publication requirement adds $500 to $2,000+
• Texas: $300 filing fee; processing in 5 to 7 business days
• Washington: $200 filing fee; processing in 5 to 10 business days
• Wyoming: $100 filing fee; processing in about 15 business days

The Delaware, Wyoming, and Nevada myth

You may have heard that forming your LLC in Delaware, Wyoming, or Nevada offers special advantages. While these states do have business-friendly laws, the benefits mostly apply to large companies, especially those seeking venture capital or planning to go public.

For small businesses that operate in a single state, forming in Delaware or Wyoming usually means paying filing fees in that state plus foreign LLC registration fees in your home state. You'd also need a registered agent in both states. In most cases, it's simpler and cheaper to form your LLC where you actually do business.

States with special requirements

Some states have unique rules that can significantly affect your costs and timeline.

• New York publication requirement: After forming an LLC in New York, you must publish a notice in 2 local newspapers for 6 consecutive weeks. Depending on your county, this can cost anywhere from $500 to over $2,000.
• California franchise tax: California charges an $800 minimum annual franchise tax for all LLCs, regardless of income. This applies in the first year and every year after.
• Illinois annual report: Illinois charges $75 for annual reports, which is higher than many other states.

Maintaining your LLC: ongoing requirements

Forming your LLC is just the beginning. Staying compliant with state and federal rules is critical to keeping your business in good standing.

Annual reports

Most states require LLCs to file an annual or biennial report. This report confirms your LLC's basic information, such as your business address, registered agent, and members. Filing fees typically range from $25 to $300.

Missing your annual report deadline can result in penalties, late fees, or even administrative dissolution of your LLC. Set a calendar reminder well before your filing deadline to avoid these consequences.

Franchise taxes

Several states charge an annual franchise tax or privilege tax for LLCs. California's $800 franchise tax is the most well-known, but other states have their own versions.

• California: $800 per year (regardless of revenue)
• Delaware: $300 per year
• Illinois: No franchise tax, but a $75 annual report fee
• Texas: Franchise tax applies to LLCs with revenue over $2.47 million

Check with your state's Department of Revenue or Franchise Tax Board for specific rates and deadlines.

Registered agent maintenance

Your registered agent must remain active and available at a physical address in your state during business hours. If your agent changes or resigns, you need to update your records with the state promptly.

Failing to maintain a registered agent can put your LLC at risk. You could miss important legal notices or fall out of compliance with state requirements.

Record-keeping requirements

Good record-keeping protects your LLC's liability shield and makes tax time much less stressful. At a minimum, keep organized records of the following:

• Financial transactions: Income, expenses, invoices, receipts, and bank statements
• Contracts and agreements: Leases, vendor contracts, client agreements, and your operating agreement
• Meeting minutes: Records of major business decisions, especially for multi-member LLCs
• Tax filings: Copies of all federal, state, and local tax returns

Tax obligations

LLCs have federal and state tax obligations that vary based on your structure and election. By default, single-member LLCs file taxes as sole proprietors and multi-member LLCs file as partnerships. You can also elect S corporation or C corporation status with the IRS. For more details on LLC tax classification, see IRS Publication 3402.

If you expect to owe $1,000 or more in taxes for the year, you're required to make quarterly estimated tax payments. Mark these deadlines on your calendar: April 15, June 15, September 15, and January 15 of the following year.

LLC vs. other business structures

Choosing the right structure depends on your goals, your tolerance for risk, and how you want to manage the business. Here's how an LLC compares to the most common alternatives. The SBA's business structure guide is a helpful resource for comparing your options.

LLC vs. sole proprietorship

• Liability protection: A sole proprietorship offers no separation between personal and business assets. An LLC shields your personal property from business debts.
• Taxes: Both structures use pass-through taxation by default. However, an LLC has the option to elect S corp tax status.
• Formality: Sole proprietorships require no state filing. LLCs require articles of organization and ongoing compliance.
• Cost: Starting a sole proprietorship is free (aside from any local permits). LLCs have filing fees and annual costs.

LLC vs. partnership

• Liability protection: In a general partnership, each partner is personally liable for business debts. In an LLC, members have limited liability.
• Management: Partnerships rely on a partnership agreement. LLCs use an operating agreement, which offers more flexibility in how management duties are assigned.
• Taxes: Both default to pass-through taxation. LLCs offer the additional option of electing corporate tax treatment.

LLC vs. corporation

• Formality: Corporations require a board of directors, officers, shareholder meetings, and detailed minutes. LLCs have fewer compliance requirements.
• Taxes: Corporations face double taxation (the company pays corporate tax, and shareholders pay tax on dividends). LLCs avoid this with pass-through taxation.
• Fundraising: Corporations can issue stock, making it easier to attract investors. LLCs must offer membership interests, which can be more complex.

LLC vs. S corporation

• Structure: An S corporation is a tax election, not a separate business structure. An LLC can elect to be taxed as an S corp.
• Self-employment taxes: S corp owners who work in the business pay themselves a reasonable salary (subject to payroll taxes) and can take additional profits as distributions, which are not subject to self-employment tax.
• Ownership restrictions: S corps are limited to 100 shareholders, all of whom must be US citizens or residents. LLCs have no such restrictions.
• Flexibility: LLCs offer more flexibility in how profits are distributed among members. S corps must distribute profits in proportion to ownership.

Tips for starting your LLC

A few proactive steps can set your LLC up for long-term success.

Create a business plan

A clear business plan helps you define your goals, identify your target market, and map out your revenue strategy. It's also a valuable tool when applying for loans or pitching to investors.

Your plan doesn't have to be lengthy. Focus on your value proposition, target audience, competitive landscape, and financial projections. You can use a business plan template to get started quickly.

Work up some financials

Before you launch, estimate your startup costs and ongoing expenses. This includes filing fees, equipment, software, insurance, marketing, and working capital.

Build a simple financial forecast that covers your first 12 months. Calculate your break-even point so you know how much revenue you need to cover your costs. This exercise gives you a realistic picture of what it takes to keep your business running.

Get professional advice

An accountant can help you choose the right tax structure and set up a bookkeeping system from the start. A lawyer can review your operating agreement and make sure you're compliant with state regulations.

If you're not ready to hire full-time professionals, consider reaching out to a local Small Business Development Center (SBDC) or SCORE mentor for free guidance.

Manage your LLC finances with confidence

Starting an LLC is a meaningful step toward building a real business. Once you're set up, the next priority is getting your finances organized so you can track cash flow, stay on top of taxes, and make informed decisions as you grow. The right accounting software can help you manage invoices, expenses, and reporting from day one.

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FAQs on starting an LLC

Here are some frequently asked questions about starting an LLC.

How long does it take to form an LLC?

In most states, you can form an LLC in 1 to 2 weeks if you file online. Some states offer expedited processing for an additional fee, which can reduce the timeline to 1 to 3 business days. Processing times vary by state, so check with your Secretary of State's office for current estimates.

Can I form an LLC myself or do I need a lawyer?

You can absolutely form an LLC yourself. The filing process is straightforward in most states, and online resources can guide you through each step. However, hiring a lawyer is a good idea if you have multiple members, complex ownership arrangements, or questions about liability protection.

What's the difference between an LLC and a sole proprietorship?

The biggest difference is liability protection. A sole proprietorship doesn't create a legal separation between you and your business, so your personal assets are at risk if the business is sued or takes on debt. An LLC creates that separation, shielding your personal property from business obligations.

Do I need to form an LLC in the state where I live?

In most cases, yes. If your business operates primarily in your home state, forming your LLC there is the simplest and most cost-effective approach. Forming in another state usually means paying fees in both states and maintaining registered agents in both locations.

How is an LLC taxed?

By default, a single-member LLC is taxed as a sole proprietorship and a multi-member LLC is taxed as a partnership. In both cases, profits pass through to the members' personal tax returns. LLCs can also elect to be taxed as an S corporation or C corporation by filing the appropriate forms with the IRS.

Can I convert my sole proprietorship to an LLC?

Yes, you can convert a sole proprietorship to an LLC in most states. The process typically involves filing articles of organization, getting a new EIN (if applicable), and updating your business licenses, bank accounts, and contracts. Some states offer a formal conversion process, while others require you to form a new LLC and transfer your assets.