Creating an LLC requires filing a short formation document with your state, paying a filing fee, and making a few decisions about how your business will be structured. The entire process can take as little as a few hours of active work, though state processing times vary. Here’s what’s involved at each step.
Choose a Name for Your LLC
Your LLC’s name needs to be distinguishable from any other 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 must typically include “LLC” or “Limited Liability Company” somewhere in it.
If you’ve found a name you like 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. This is optional, but useful if you need time to get other pieces in place before filing.
Appoint a Registered Agent
Every LLC must have a registered agent: a person or company designated to receive legal documents, tax notices, and government correspondence on your behalf. The registered agent needs a physical street address in the state where you’re forming your LLC (P.O. boxes don’t count).
You can serve as your own registered agent if you have a qualifying address in that state. The downside is that you need to be available at that address during normal business hours. Many business owners hire a commercial registered agent service instead, which typically costs $50 to $300 per year. This keeps your home address off public records and ensures someone is always available to accept documents.
File Articles of Organization
The Articles of Organization (called a Certificate of Formation or Certificate of Organization in some states) is the document that officially creates your LLC. You file it with your state’s Secretary of State office, usually online. The form is short, typically one or two pages, and asks for:
- LLC name and address
- Registered agent’s name and address
- Management structure, meaning whether the LLC will be member-managed (owners run the business directly) or manager-managed (one or more designated managers handle operations)
- Organizer information, the name and signature of the person filing the paperwork
Some states ask for additional details like the LLC’s purpose or its duration, but most keep it simple. Online filing is the fastest route, and many states process applications within a few business days. Expedited processing is available in most states for an additional fee if you need approval faster.
What You’ll Pay in Filing Fees
State filing fees for Articles of Organization range from $40 to over $400. Most states fall in the $50 to $200 range. On the lower end, you’ll find fees around $40 to $100. Mid-range states charge $125 to $175. Higher-cost states charge $200 to $300 or more, and a few states push past $400 when you factor in required additional filings.
The filing fee is a one-time cost for formation, but keep in mind that most states also charge ongoing fees. Annual or biennial reports, franchise taxes, and other recurring obligations vary widely. Some states charge as little as $10 to $15 for an annual report, while others impose minimum annual taxes of several hundred dollars regardless of whether your LLC earned any revenue. Check your state’s Secretary of State website for the full picture before you file.
Draft an Operating Agreement
An operating agreement is an internal document that spells out how your LLC will be run. Not every state requires one by law, but creating one is strongly recommended even for single-member LLCs. Without an operating agreement, your state’s default LLC rules govern your business, and those defaults may not match what you actually want.
According to the U.S. Small Business Administration, an operating agreement typically covers:
- Ownership percentages for each member
- Voting rights and responsibilities
- Powers and duties of members and managers
- Profit and loss distribution, which doesn’t have to follow ownership percentages
- Meeting procedures
- Buyout and buy-sell rules, including what happens if a member wants to leave or passes away
You don’t file this document with the state. It stays with your business records. But banks, investors, and courts will look for it if disputes or questions arise. For a single-member LLC, the operating agreement mainly serves to reinforce that the business is a separate legal entity from you personally, which helps protect your limited liability status.
Get an EIN from the IRS
An Employer Identification Number (EIN) is essentially a Social Security number for your business. 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 a personal Social Security number on business documents.
Applying is free and takes about five minutes on the IRS website. You’ll receive your EIN immediately after completing the online application. There is no cost, and you never need to renew it.
Understand How Your LLC Will Be Taxed
An LLC is not a fixed tax category. The IRS lets LLCs choose how they want to be taxed, and the default depends on how many members you have.
A single-member LLC is treated as a “disregarded entity,” meaning the IRS ignores the LLC for income tax purposes and you report all business income and expenses on your personal tax return (Schedule C). A multi-member LLC is treated as a partnership by default, meaning the business files an informational return and each member reports their share of income 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 LLCs also elect S corporation tax status by filing Form 2553, which can reduce self-employment taxes once the business reaches a certain income level. These elections are optional, and the default treatment works fine for most new businesses.
Open a Business Bank Account
Once you have your Articles of Organization and EIN, open a dedicated business bank account. This is not just a good practice; it’s essential for maintaining limited liability protection. If you mix personal and business funds in the same account, a court could decide that your LLC is just an extension of you personally, which defeats the entire purpose of forming one.
Most banks will ask for your Articles of Organization, EIN confirmation letter, operating agreement, and a government-issued ID. Some banks also require a separate business license or a “doing business as” certificate if you operate under a name different from your registered LLC name.
Handle State and Local Licenses
Forming an LLC gives you a legal business entity, but it doesn’t automatically give you permission to operate. Depending on your industry and location, you may need business licenses, permits, or professional registrations at the state, county, or city level. Common examples include general business licenses, sales tax permits (if you sell taxable goods or services), and industry-specific permits for fields like food service, construction, or healthcare.
Your state’s Secretary of State or Department of Revenue website is the best starting point. Many states offer a business license lookup tool that tells you exactly which permits apply based on your business type and location.
Stay Current with Annual Requirements
After formation, most states require LLCs to file periodic reports, usually annually or every two years. These reports confirm your LLC’s basic information: address, registered agent, and members or managers. The filing fees for these reports range from $10 to over $100 depending on the state. Missing the deadline can trigger late fees, and some states will administratively dissolve your LLC if you fall too far behind.
Mark your state’s filing deadline on your calendar as soon as your LLC is approved. Some states set the deadline based on your formation date, others use a fixed calendar date for all businesses. Your state will typically send a reminder, but don’t count on it.