To form an LLC, you need a business name, a registered agent, articles of organization filed with your state, and an Employer Identification Number (EIN) from the IRS. Beyond those essentials, you’ll also want an operating agreement, a business bank account, and any licenses your industry or locality requires. Here’s what each of those involves and how to pull it all together.
Choose a Business Name
Your LLC’s name has to be distinguishable from other businesses already registered in your state. Most states let you search their business name database online for free. The name typically must include “LLC” or “Limited Liability Company” somewhere in it, and it can’t include words that imply it’s a different type of entity, like “Inc.” or “Corporation.”
If you’ve found a name you like but aren’t ready to file yet, most states let you reserve the name for a small fee, usually for 60 to 120 days.
Designate a Registered Agent
Every LLC needs a registered agent, a person or company authorized to receive legal documents (like lawsuits or government notices) on the LLC’s behalf. The registered agent must have a physical street address in the state where you’re forming the LLC. P.O. boxes don’t count.
You can serve as your own registered agent if you have an address in the state. The downside is that you need to be available at that address during normal business hours. Many LLC owners hire a 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 are the formal document that creates your LLC with the state. You file them with your state’s business filing office, usually the Secretary of State. Filing fees range from $35 to $500 depending on where you’re forming the LLC.
The form itself is usually short, often just one or two pages. You’ll need to provide:
- LLC name and principal address: Your business’s legal name and its main location.
- Registered agent name and address: The person or service that will accept legal documents.
- Business purpose: Many states accept a broad statement like “to engage in any lawful activity,” which gives you flexibility to change direction without amending your filing.
- Members or managers: The names and addresses of the LLC’s owners (members) or, if you’re using a manager-managed structure, the managers who will run day-to-day operations.
- Organizer information: The person filing the paperwork, which can be you or an attorney.
Processing times vary. Some states approve filings within a few business days, while others take several weeks. Most offer expedited processing for an additional fee.
Get an EIN From the IRS
An Employer Identification Number is essentially a Social Security number for your business. You need one to open a business bank account, hire employees, and file taxes. Even single-member LLCs benefit from having an EIN because it keeps your personal Social Security number off business documents.
Applying is free and takes about five minutes on the IRS website. If you apply online, you’ll receive your EIN immediately. Mail and fax applications take one to two weeks.
Draft an Operating Agreement
An operating agreement is an internal document that spells out how your LLC will be run. Not every state legally requires one, but having one is important regardless. Without it, your state’s default LLC laws will govern how decisions get made, how profits are split, and what happens if a member leaves, and those defaults may not match what you actually want.
A solid operating agreement covers:
- Ownership percentages: How much of the company each member owns.
- Profit and loss distribution: How earnings and losses are divided, which doesn’t have to match ownership percentages.
- Voting rights: How decisions get made and what requires a vote.
- Roles and duties: Who manages daily operations and what authority they have.
- Buyout and transfer rules: What happens if a member wants to leave, sell their interest, or passes away.
- Dissolution procedures: How the LLC winds down if the members decide to close it.
For a single-member LLC, the operating agreement is simpler but still worth having. It reinforces the legal separation between you and your business, which strengthens the liability protection that’s the whole point of forming an LLC.
Open a Business Bank Account
Keeping business finances separate from personal ones is critical. Mixing the two, called commingling, can weaken your LLC’s liability protection because a court may decide the LLC isn’t truly a separate entity from you personally.
When you go to the bank, expect to bring:
- Your EIN: The bank uses this to identify the business for tax purposes.
- Articles of organization: Proof that the LLC legally exists.
- Operating agreement: Shows who has authority over the account.
- Business license: If your city or county requires one.
Some banks also ask for a government-issued photo ID for each person who will have signing authority on the account. Shop around on fees, as monthly maintenance charges and minimum balance requirements vary widely between banks.
Obtain Required Licenses and Permits
Forming an LLC doesn’t automatically give you permission to operate. Depending on your industry and location, you may need a general business license from your city or county, a state-level professional license (for fields like contracting, cosmetology, or accounting), a sales tax permit if you’re selling taxable goods, or industry-specific permits like health department certifications for food businesses.
Check with your city, county, and state to see what applies. The SBA also maintains an online tool that helps identify federal and state license requirements by industry.
Understand Tax Elections
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, so the LLC itself doesn’t pay income tax.
You also have the option to elect S corporation or C corporation tax treatment by filing paperwork with the IRS. S corp treatment can save money on self-employment taxes once your business reaches a certain income level, because you can split income between a reasonable salary (which gets taxed for Social Security and Medicare) and distributions (which don’t). This election doesn’t change your legal structure. You’re still an LLC, just taxed differently.
Stay Current With Annual Filings
Most states require LLCs to file periodic reports, sometimes called annual reports or biennial reports, to keep the business in good standing. These reports update the state on basic information like your business address, registered agent, and members. Filing fees range from $0 in a handful of states to $300 or more in others, with most falling between $25 and $150.
Some states also charge a franchise tax or annual business license fee on top of the report filing. Missing a deadline can trigger late fees, and states that don’t receive your filing may administratively dissolve your LLC, which strips away your liability protection until you reinstate it. Set a calendar reminder for your state’s due date so you don’t let it lapse.