Starting your own LLC takes as little as a few hours of paperwork and a filing fee that ranges from about $40 to $500, depending on your state. The process involves choosing a name, designating a registered agent, filing a formation document with your state, drafting an operating agreement, and getting a tax ID number. Here’s how each step works.
Choose a Name for Your LLC
Your LLC name must be distinguishable from any business already registered in your state. Most states let you search existing business names through the Secretary of State’s website for free. The name typically needs to include “LLC” or “Limited Liability Company” somewhere in it.
If you find a name you want but aren’t ready to file yet, many states offer a name reservation for a small fee that holds the name for 60 to 120 days. Keep in mind that registering an LLC name doesn’t give you trademark rights. If you plan to build a brand around the name, a separate federal trademark search is worth doing before you commit.
Designate a Registered Agent
Every LLC needs a registered agent, sometimes called an agent for service of process. This is a person or company authorized to receive legal and tax documents on behalf of your business, including lawsuit notices, subpoenas, compliance reminders from the Secretary of State, and state tax correspondence.
The registered agent must have a physical street address in the state where you’re forming the LLC. A P.O. Box doesn’t qualify. You can serve as your own registered agent if you have an address in that state, which costs nothing. The trade-off is that your personal address becomes part of the public record, and you need to be available at that address during business hours to accept documents. Professional registered agent services typically cost $100 to $300 per year and keep your home address off public filings.
File Your Articles of Organization
This is the document that officially creates your LLC. Depending on your state, it may be called Articles of Organization, Certificate of Organization, or Certificate of Formation. You file it with your state’s Secretary of State office or equivalent business filing agency, and most states now accept online filings.
The form itself is usually straightforward. You’ll need to provide your LLC’s name, its principal business address, the name and physical address of your registered agent, and whether the LLC will be member-managed or manager-managed. In a member-managed LLC, the owners run the business directly. In a manager-managed structure, one or more designated managers (who may or may not be owners) handle day-to-day decisions.
Filing fees vary significantly by state. Some states charge as little as $40 to $50, while others run $200 or more. A handful of states push total initial costs above $400 when you factor in required publication notices or additional filings. Most states process online filings within a few business days, though processing times can stretch to several weeks during busy periods or if you file by mail.
Draft an Operating Agreement
An operating agreement is the internal document that spells out how your LLC will be run: who owns what percentage, how profits and losses are divided, how decisions get made, and what happens if a member wants to leave or the business dissolves. Not every state legally requires one, but the U.S. Small Business Administration recommends that every LLC have a written operating agreement regardless of state rules.
Without an operating agreement, your state’s default LLC rules govern your business. Those defaults are generic and rarely match what the owners actually intended. For example, most state default rules split profits equally among members, even if one member contributed significantly more capital. A written agreement overrides those defaults and gives you control over the terms.
An operating agreement also reinforces the legal separation between you and the business. Without one, your LLC can start to resemble a sole proprietorship or general partnership in the eyes of a court, which could weaken the personal liability protection that made you form an LLC in the first place. Even single-member LLCs benefit from having this document in place.
You can draft an operating agreement yourself using templates, or hire an attorney to customize one. For a single-member LLC with simple operations, a template often works fine. For multi-member LLCs, especially those with unequal ownership splits or complex profit-sharing arrangements, professional drafting can prevent disputes later.
Get an Employer Identification Number
An Employer Identification Number (EIN) is essentially a Social Security number for your business. The IRS uses it to identify your LLC for tax purposes. You need one if your LLC has more than one member, if you plan to hire employees, or if you want to open a business bank account (most banks require it). Even single-member LLCs with no employees often get an EIN to avoid using their personal Social Security number on business documents.
You can apply for an EIN for free on the IRS website by filing Form SS-4 online. The online application is available during business hours and gives you your number immediately. There is no fee. Be cautious of third-party websites that charge to obtain an EIN on your behalf, since the IRS provides this service at no cost.
Open a Business Bank Account
Once you have your EIN and a copy of your filed Articles of Organization, open a dedicated bank account for your LLC. Keeping business and personal finances separate is one of the most important things you can do to maintain your liability protection. If you mix personal and business funds in the same account, a court could “pierce the corporate veil” and hold you personally responsible for the LLC’s debts.
Most banks will ask for your Articles of Organization, your EIN confirmation letter, your operating agreement (if you have one), and a government-issued ID. Some banks offer free business checking for small LLCs, while others charge monthly fees that range from $10 to $30 unless you maintain a minimum balance.
Understand How Your LLC Will Be Taxed
An LLC doesn’t have its own tax category by default. Instead, the IRS classifies it based on how many members it has. A single-member LLC is treated as a “disregarded entity,” meaning all income and expenses flow through to your personal tax return. You report the business activity on Schedule C, and you’ll owe self-employment tax (Social Security and Medicare) on the net profit.
A multi-member LLC is treated as a partnership by default. The LLC files an informational return (Form 1065), and each member receives a Schedule K-1 showing their share of income, deductions, and credits. Each member then reports that on their personal return.
Either type of LLC can elect to be taxed as a corporation instead by filing Form 8832 with the IRS. Some LLC owners choose S corporation tax treatment (filed via Form 2553) once profits are high enough that the self-employment tax savings outweigh the added payroll and filing costs. This election doesn’t change your legal structure; your LLC remains an LLC, but the IRS treats it differently for tax purposes.
Handle State and Local Requirements
Filing your Articles of Organization creates the LLC, but you may need additional licenses or permits before you can legally operate. Many cities and counties require a general business license. Certain industries, such as construction, food service, healthcare, and professional services, often require specific state or local permits on top of that.
Most states also require LLCs to file an annual or biennial report, which is a brief update confirming your business address, registered agent, and member information. Fees for these reports range from $10 to $300 depending on the state. Missing the deadline can result in late fees, and some states will administratively dissolve your LLC if you fall far enough behind.
Total Costs to Expect
Your minimum startup cost is the state filing fee for your Articles of Organization, which runs roughly $40 to $500. Beyond that, here’s what you might spend:
- Professional registered agent service: $100 to $300 per year, if you don’t serve as your own agent
- Operating agreement: Free if you use a template, or $500 to $2,000 if drafted by an attorney
- EIN: Free from the IRS
- Business licenses and permits: Varies widely, from $25 to several hundred dollars depending on your location and industry
- Annual report fees: $10 to $300 per year in most states
A bare-bones, single-member LLC in a low-fee state can be up and running for under $100. In higher-fee states, especially those with franchise taxes or publication requirements, initial costs can exceed $1,000.