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

To start an LLC, you file Articles of Organization with your state, pay the state filing fee, and complete a few additional steps — appointing a registered agent, drafting an operating agreement, and getting an Employer Identification Number (EIN) from the IRS. Most people can get through the full process in a week or two.

An LLC — Limited Liability Company — is a business structure that separates your personal finances from your business finances. If your business is sued or can't pay its debts, your personal assets generally aren't on the hook. That protection, combined with flexible tax treatment, is why LLCs are the most common business structure for small business owners.

LLCs are also flexible in how they're taxed. By default, a single-member LLC is taxed as a sole proprietorship and a multi-member LLC is taxed as a partnership — meaning income passes through to your personal tax return. You can also elect to be taxed as an S Corporation or C Corporation if that makes more sense for your situation. A tax professional can help you figure out which election fits your business.

The main cost to form an LLC is the state filing fee for your Articles of Organization, which ranges from roughly $40 to $500 depending on the state. The EIN from the IRS is free. Some states also charge an annual report fee or franchise tax to keep your LLC in good standing after formation.

A few states add costs that catch people off guard. New York, for example, requires LLCs to publish a formation notice in local newspapers — a requirement that can add hundreds of dollars to your startup costs. It's worth checking your state's specific requirements before you file.

For most small business owners, the right formation state is the state where you live and work. Forming in your home state keeps things simple — you avoid paying foreign qualification fees to register your LLC in a second state, which you'd need to do anyway if you operate there.

Delaware gets a lot of attention for its business-friendly laws and specialized court system, and it's a common choice for businesses planning to raise outside investment. But if you're running a local business or a solo operation, forming in Delaware and then registering as a foreign LLC in your home state usually costs more than it's worth.

Your LLC name needs to be distinguishable from other registered businesses in your state and must include a designator like "LLC" or "Limited Liability Company." Most states let you check name availability through the Secretary of State's website before you file.

Beyond the state's availability check, it's worth searching the U.S. Patent and Trademark Office database if you plan to use the name as a brand. A name that's available in your state can still conflict with a federally registered trademark. Checking both early saves you from having to rebrand later.

Every LLC needs a registered agent — a person or business with a physical address in the formation state who is available during business hours to receive legal documents and official state mail on behalf of your LLC. You can serve as your own registered agent, but most business owners use a registered agent service.

Using a registered agent service keeps your personal address off public state records and means you won't miss a legal notice because you were traveling or away from the office. It's one of those small decisions that matters more than it seems at the start.

The Articles of Organization is the primary formation document for an LLC. You file it with the Secretary of State — or the equivalent agency — in your formation state, along with the state filing fee. Once the state approves it, your LLC legally exists.

The information required varies by state, but most Articles of Organization ask for your LLC name, principal address, registered agent details, and the names of the members or managers. Filing fees range from roughly $40 to $500. Some states offer expedited processing for an additional fee if you need approval faster.

An operating agreement is an internal document that spells out how your LLC is owned and run — member ownership percentages, voting rights, profit and loss allocation, and how decisions get made. It's not filed with the state. You keep it with your business records.

Not every state requires an operating agreement, but having one matters even for single-member LLCs. Without it, your state's default LLC rules govern your business — and those defaults may not reflect what you actually want. For multi-member LLCs, a clear operating agreement is the document that prevents disputes from becoming expensive problems.

An Employer Identification Number (EIN) is a 9-digit number the IRS uses to identify your business for tax purposes. You need one if your LLC has employees, is taxed as a partnership or corporation, or files certain federal tax returns. Even if none of those apply yet, getting an EIN is worth doing — it keeps your Social Security number off business documents and most banks require one to open a business bank account.

Applying for an EIN is free and takes about 15 minutes online at irs.gov/ein. The IRS issues the number immediately upon approval. The online application is available Monday through Friday, 7 AM – 10 PM ET. If you apply by fax, expect about 4 business days.

After your LLC is formed and you have your EIN, check what state and local registrations your business needs. Depending on your state and industry, this can include a state tax registration, a sales tax permit, a business license, or professional licenses for regulated fields.

Requirements vary widely by state and by what your business does. A retail business selling taxable goods needs a sales tax permit. A contractor may need a state contractor's license. Your Secretary of State's website and your state's department of revenue are the right places to check what applies to you. Getting this right at the start is much easier than catching up on missed registrations later.