How to Start an LLC: The Complete 2026 Guide

This guide walks you through every stage: choosing your state, naming your business, filing your Articles of Organization, drafting an operating agreement, and getting an EIN. It also covers the post-formation compliance checklist that keeps your company in good standing year after year.

What Is an LLC and Is It Right for Your Business?

An LLC (limited liability company) legally separates your personal assets from your company’s debts and liabilities. If your business gets sued or can’t pay its bills, creditors generally cannot pursue your home, savings, or personal property. You get real liability protection without the rigid formality a corporation requires.

LLCs work best for solo entrepreneurs, freelancers, consultants, and small business owners who want that legal separation without complex governance rules. They’re equally well-suited for multi-member businesses where co-owners need a clear, written framework for profit splits and decision-making. If you’re ready to move past operating as a sole proprietor, an LLC is almost always the most flexible and practical way to formalize.

Key Benefits of Forming an LLC

• Liability protection. Your personal assets stay shielded from business debts and lawsuits. This is the core reason most entrepreneurs choose this structure over operating solo.
• Pass-through taxation. Profits flow directly to members and get taxed at personal income rates. This avoids the double taxation C-corporations face.
• Management flexibility. You decide how to run the business, whether member-managed or manager-managed, without mandatory board meetings, formal minutes, or stock issuance rules.
• Credibility. “LLC” in your business name signals a registered, legitimate entity. This strengthens relationships with clients, vendors, and banks.

LLC vs. Sole Proprietorship vs. Corporation

How to Start an LLC in 7 Steps

Work through each step below in order. Skipping ahead, especially applying for an EIN before your Articles of Organization are approved, can cause delays or require you to refile.

Step 1: Choose Your State. Form Where You Actually Do Business, Not Just Where Fees Are Lowest.

For most entrepreneurs, the right formation state is the state where you live and operate. That’s where your customers are, where you’ll hire employees, and where you’ll pay taxes. Forming there keeps your compliance simple and your costs predictable.

You’ve probably seen advice suggesting Delaware or Wyoming as the “smart” choice. That logic applies to venture-backed corporations and large multi-state operations, not to a single-member LLC selling services from a home office. If you form in a different state than where you operate, you’ll need to register as a foreign LLC in your home state anyway. That means a separate filing, a second registered agent, and duplicate annual report fees. You pay twice for the privilege of a Delaware address.

Form in your home state. If your business truly operates across multiple states from day one, talk to an attorney before choosing your formation state. For most small business owners, the answer is simple.

Step 2: Name Your LLC. Follow Your State’s Naming Rules Before You Fall in Love With a Name.

Every state enforces three basic naming rules. Violations will get your filing rejected.

Rule 1: Your name must include a designator. Most states accept “LLC,” “L.L.C.,” or “Limited Liability Company.” Some also allow “Limited Company” or “LC.” Check your state’s Secretary of State website to confirm which designators it accepts.

Rule 2: Your name cannot duplicate an existing registered name. Each state maintains a public business name database. Search it before you commit. An exact match isn’t the only problem. Many states also reject names that are “deceptively similar” to an existing registration, even with minor spelling changes. The search is free and takes two minutes.

Rule 3: Certain words are restricted. Words like “bank,” “insurance,” “trust,” and “attorney” typically require state approval or proof of licensure. Using a restricted word without clearance will get your Articles of Organization rejected.

Optional: Reserve your name. Most states let you reserve a name for 30 to 120 days while you finalize your filing. Reservation fees are usually $10–$50.

One more step worth taking: search the U.S. Patent and Trademark Office database and buy the matching domain name before you file. State registration protects your name in that state only. It does not stop someone else from holding a federal trademark or using an identical domain.

Step 3: Choose a Registered Agent. Designate a Person or Service to Receive Legal Documents on Your LLC’s Behalf.

A registered agent is the official point of contact between your LLC and the state. This is the person or entity you designate to receive legal documents, government mail, and official notices, including lawsuits, tax notices, compliance reminders, and letters from state agencies.

Every state requires registered agents to maintain a physical street address (no P.O. boxes) in the formation state and be available during business hours. A P.O. box doesn’t qualify because a process server must physically deliver legal documents.

You have three options.

• Serve as your own registered agent. If you have a physical address in your formation state and can be available during business hours, you can designate yourself. This costs nothing but requires listing your personal address on public records.
• Appoint a trusted individual. A business partner, attorney, or family member can serve, as long as they meet the state’s residency and availability requirements.
• Use a professional registered agent service. Professional services provide digital document delivery, compliance reminders, multi-state coverage, and privacy protection by using their address instead of yours. This matters if you work from home or travel often.

States can dissolve an LLC for failing to maintain a registered agent, which can expose owners to personal liability. Don’t treat this requirement as a formality.

Step 4: File Your Articles of Organization. Submit the Document That Officially Creates Your LLC With the State.

Your Articles of Organization (sometimes called a Certificate of Organization or Certificate of Formation) is the founding document of your LLC. Filing it with your state’s Secretary of State is what legally brings your LLC into existence.

Here’s what you’ll typically need to provide.

1. LLC name — exactly as it will appear on your registration, including the designator
2. Principal business address — your LLC’s primary physical location; P.O. boxes are not accepted
3. Registered agent’s name and physical address
4. Management structure — member-managed or manager-managed
5. Member or organizer names — some states require member names; others only ask for the organizer
6. Business purpose — most states accept “any lawful business purpose”; a few require specifics

You can file online through your state’s Secretary of State portal or by mail. Online filing is faster and usually generates immediate confirmation. Filing fees range from $50 to $500 or more. The cost table later in this article breaks down fees by state.

File your Articles of Organization before you apply for an EIN. Applying for an EIN before your state approves your entity can delay the process or require you to refile.

Step 5: Create an Operating Agreement. Document How Your LLC Is Owned and Managed Before Any Disputes Arise.

An operating agreement is the internal governing document of your LLC. It defines who owns what, who decides what, and what happens if things go wrong. Most states don’t legally require one, but skipping it is a mistake. Without one, your LLC defaults to your state’s generic LLC statutes, which may not reflect what you actually want.

What every operating agreement should cover:

• Ownership percentages — each member’s stake as a percentage of the whole
• Capital contributions — how much each member invested
• Voting rights — whether decisions require a simple majority, unanimous consent, or something else
• Profit and loss distribution — how and when profits flow to members
• Member roles and responsibilities — who manages day-to-day operations
• Dissolution procedures — what happens if the LLC closes and how assets get distributed

Single-member vs. multi-member LLCs

For a single-member LLC, the operating agreement works more like a personal policy document. It defines your relationship with the business: how you’ll document capital contributions, how you’ll pay yourself, and what happens if you become unable to run the business. It also reinforces the legal separation between you and the business, which matters if your liability protection is ever challenged in court.

For a multi-member LLC, the operating agreement does much heavier lifting. Key clauses to negotiate carefully include buy-sell provisions (what happens if a member wants to leave), deadlock-breaking rules for equal-ownership LLCs, and provisions for admitting new members. A well-drafted operating agreement is the difference between a disagreement that resolves cleanly and one that ends up in court.

Step 6: Get Your EIN. Apply for Your Federal Tax ID Number From the IRS. It’s Free and Takes Minutes.

Your EIN (Employer Identification Number) works like a Social Security Number for your business. The IRS uses it to identify your LLC for tax purposes. You’ll need it to open a business bank account, hire employees, file federal taxes, and apply for most business licenses.

Apply directly at IRS.gov at no cost. The online application issues your number instantly. Watch out for websites that charge for an EIN. You never have to pay a fee to get one.

By default, a single-member domestic LLC is treated as a disregarded entity under Treasury Regulation § 301.7701-3 and can technically use the owner’s Social Security Number for federal tax filings. Getting an EIN anyway is the smarter move. It keeps your Social Security Number off vendor W-9 forms, protects against identity theft, and most banks require an EIN to open a business account regardless.

Apply only after your Articles of Organization are approved.

Step 7: Open a Business Bank Account and Get Required Licenses. Separate Your Finances and Confirm Your Legal Authority to Operate.

Open a dedicated business bank account.

A separate business bank account isn’t just good practice. It’s structural protection. Mixing personal and business funds is one of the most common ways LLC owners accidentally pierce the corporate veil. That’s the legal term for a court stripping away your liability protection because you didn’t treat your LLC as a distinct entity. Keep the accounts separate from day one and document any transfers between them.

To open a business account, most banks require your EIN, your Articles of Organization, and a government-issued ID. Some also ask for your operating agreement, especially for multi-member LLCs where the bank wants to confirm signing authority.

Get the licenses and permits your business needs.

Forming your LLC doesn’t mean you’re automatically cleared to operate. Most businesses need one or more of the following.

• General business license — many cities and counties require a basic operating license; check with your local county or city clerk
• Professional or occupational license — required for regulated professions like contractors, accountants, real estate agents, and healthcare providers; typically state-issued with examination or continuing education requirements
• Sales tax permit — if you sell taxable goods or services, most states require you to register with the state revenue agency to collect and remit sales tax

Your state’s official business portal is the best starting point for state-level requirements. For local licenses, contact your city or county clerk directly. Local requirements aren’t always listed on state websites. Operating without a required license can result in fines or forced closure.

How Much Does an LLC Cost?

LLC filing fees generally range from $35 to $500, with the U.S. average around $132. Beyond the filing fee, account for ongoing costs: annual reports, franchise taxes, registered agent fees, and business licenses. Add those up over your first year, and the real cost of forming and maintaining an LLC runs from roughly $50 to $800 or more depending on your state.

State filing fees go directly to the state, completely separate from any formation service fees.

State Filing Fees and Annual Report Costs

LLC filing fees are one-time costs paid when forming your LLC. Annual fees (also called annual reports, franchise taxes, or renewal fees) are recurring charges to keep your LLC in good standing.

The table below covers 15 representative states. Always confirm current rates and due dates with the Secretary of State for your jurisdiction.

Fees verified May 2025. Confirm current amounts at your state’s official Secretary of State website before filing.

A few patterns worth noting.

• Arizona, Missouri, New Mexico, and Ohio do not require an annual or biennial report or fee.
• California is the most expensive state overall, with an $800 minimum franchise tax due every year on top of the filing fee and biennial Statement of Information.
• New York, Arizona, and Nebraska require you to publish your LLC formation in a local newspaper. New York’s rule includes publication in two newspapers for six weeks; rates vary by region and publisher.

The Texas no-tax-due threshold has shifted upward: the 2024–2025 threshold was $2,470,000. The Texas Comptroller has set the 2026 threshold at $2,650,000, meaning even more small LLCs will owe nothing under the franchise tax going forward.

Additional Costs to Budget For

• Registered agent service: $0 to $300/year. You can serve as your own agent for free, or hire a professional service for $50–$300 per year.
• Operating agreement: $0 to $500+. DIY templates are available at no cost. Professional drafting typically costs $200–$500.
• EIN: $0. Applying directly through the IRS is free.
• Business licenses and permits: varies. A general license costs $15–$200 in most states. Professional licenses for regulated industries run higher.
• Expedited filing: $25 to $200 (optional). Most states offer faster processing for an extra fee.

Realistic first-year cost estimate. A single-member LLC in a low-fee state (Arizona, Missouri, or New Mexico) can cost as little as $50–$150 total if you serve as your own registered agent and draft your own operating agreement. A multi-member LLC in a higher-fee state with professional registered agent service and an attorney-drafted operating agreement can run $800 to $1,500 or more. California founders should budget an extra $800 minimum for the franchise tax alone, regardless of whether the business earns a single dollar.

Can I Set up an LLC by Myself?

Yes. You can file an LLC yourself directly through your state’s Secretary of State website. No attorney is required. You’ll research your state’s requirements, complete the forms, and track your own annual report deadlines. For a simple single-member LLC in a low-fee state, DIY filing is a perfectly legitimate path.

What Are the Downsides of an LLC?

• Self-employment tax on all profits. LLC members pay self-employment tax (currently 15.3% on the first $160,200 of net earnings) on their entire share of business profits. S-corp shareholders can split compensation between a salary (subject to payroll taxes) and distributions (not subject to payroll taxes). This can meaningfully reduce their tax burden as profits grow. If your LLC generates substantial net income, the difference is worth discussing with a tax advisor.
• Annual fees and report obligations that sole proprietors don’t face. Operating as a sole proprietor costs nothing in state filing fees and requires no annual reports. An LLC brings ongoing compliance obligations: annual or biennial report filings, renewal fees, and in some states, franchise taxes, every year the entity exists. Missing deadlines can result in late fees or administrative dissolution.
• Ownership is harder to transfer than corporate stock. Transferring an LLC ownership interest typically requires member consent and an amendment to the operating agreement. Corporations transfer ownership simply by selling shares. If you plan to bring on investors, sell equity, or plan an exit, the corporate structure may offer more flexibility.
• State-specific costs can be significant. Not all states treat LLCs equally, and costs that don’t appear on the basic filing fee schedule add up fast.
• Less established legal precedent than corporations. Corporations have centuries of case law defining governance disputes, fiduciary duties, and liability questions. LLC law is newer and varies more between states. This can mean more uncertainty if your LLC ends up in litigation over an unusual governance question.

For most small business owners, these trade-offs are manageable and far outweighed by the liability protection and flexibility an LLC provides. Understanding them upfront lets you structure your LLC and plan your taxes more deliberately from day one.

Post-Formation Compliance Checklist

Your Articles of Organization are approved and your LLC exists. Now the clock starts on a new set of obligations. Missing any of them can cost you money, good standing, or the liability protection you just paid to establish.

• ☐ Obtain your EIN from the IRS. Apply at IRS.gov at no cost. The online application issues your number instantly.
• ☐ Open a dedicated business bank account. Use your EIN and state-issued formation documents to open an account in your LLC’s name. Every dollar that flows through your business should move through this account, not your personal one.
• ☐ Sign your operating agreement. A signed operating agreement creates a documented record of ownership percentages, member roles, and decision-making authority. For single-member LLCs, sign, date, and keep it in your business records. For multi-member LLCs, all members should sign before the business takes on any clients, contracts, or expenses.
• ☐ Register for state sales tax if you sell taxable goods or services. Operating without a required sales tax permit can result in penalties and back taxes. Check your state’s department of revenue website to confirm whether your product or service category is taxable.
• ☐ Apply for required business licenses and permits. Check with your city or county clerk for local requirements, your state licensing board for professional or occupational licenses, and your state’s business portal for state-level permits.
• ☐ Note your annual report due date and fee. Most states require LLCs to file an annual or biennial report and pay a renewal fee to stay in good standing. Mark it now. Late filings trigger late fees. Continued non-compliance can result in administrative dissolution.
• ☐ Set up a separate business accounting system. A dedicated accounting method, whether a spreadsheet or small-business software, tracks income, expenses, and owner distributions from day one. Clean books simplify tax filing, make quarterly estimated payments manageable, and give you a clear paper trail if the IRS questions your deductions.
• ☐ Separate your estimated tax obligations. LLC members pay federal income tax on their share of profits plus self-employment tax, and neither is withheld automatically. The IRS generally requires quarterly estimated payments if you expect to owe $1,000 or more for the year. Set aside a percentage of every payment you receive and pay quarterly to avoid underpayment penalties.
• ☐ Evaluate your insurance needs. Your LLC’s liability protection shields personal assets from business debts and lawsuits, but it doesn’t protect the business itself from claims, property damage, or professional errors. General liability insurance covers third-party bodily injury and property damage. Professional liability insurance (errors and omissions, or E&O) covers claims that your work caused financial harm to a client.
• ☐ Keep your registered agent information current. If your agent’s address changes, or if you change agents, update that information with your state promptly. An outdated registered agent address means legal notices and compliance reminders may never reach you.

Frequently Asked Questions

How Long Does It Take to Get an LLC Approved?

Processing times vary by state, typically 1–5 days online or 2–6 weeks by mail. Most states approve an LLC in about 3 to 10 business days for online filings. Mail filings take much longer, and delays compound if your filing contains errors. Most states offer expedited processing for an extra fee. If your launch has a hard deadline, file online and consider expedited processing. Confirm your state’s specific turnaround times at the Secretary of State’s website before you pay.

What Is the Difference Between a Domestic LLC and a Foreign LLC?

A domestic LLC is formed and operates in its home state. A foreign LLC is that same LLC registering to do business in another state. “Foreign” means another U.S. state, not another country. The liability protection remains the same, but foreign registration adds extra filings, fees, and compliance requirements in every additional state. Simply having customers or online sales in another state usually doesn’t require foreign qualification, though it may trigger sales tax obligations.

Do I Need an Attorney to Form an LLC?

No attorney is required in any state. You can complete the Articles of Organization and submit them directly through your state’s Secretary of State portal. Legal counsel is worth considering for complex multi-member structures, particularly when co-owners need custom buy-sell provisions, profit-sharing arrangements, or deadlock-breaking rules beyond what a standard template covers. Businesses in regulated industries (healthcare, financial services, law) should also consult an attorney before filing. These sectors often have entity-specific licensing requirements that interact with your LLC structure in non-obvious ways.

What Happens if I Don’t File My Annual Report?

Most states assess a late fee when you miss your annual report deadline. Continued non-compliance allows the state to dissolve your LLC. This strips it of legal standing and the liability protection you formed it to get. Reinstatement is possible in most states but requires paying all outstanding fees and filing reinstatement paperwork. That takes more time and costs more than simply filing on time. Processing backlogs can also delay reinstatement, leaving your LLC in legal limbo longer than expected. Mark your annual report due date the day your LLC is approved. Missing it isn’t a technicality. It’s a compliance failure with real consequences.