The best LLC to start depends on how many owners you have, what kind of work you do, and how much profit you expect to earn. There’s no single “best” structure. A freelance graphic designer, a real estate investor with multiple properties, and a group of doctors opening a practice all need different LLC setups. The right choice comes down to matching your business reality to the LLC type that gives you the most protection, simplest taxes, and lowest ongoing costs.
Single-Member LLC: Best for Solo Owners
If you’re running a business by yourself, a single-member LLC is the simplest and most common starting point. You get full personal liability protection, meaning your personal assets (house, car, savings) are shielded if your business gets sued or can’t pay its debts. The paperwork is minimal compared to other structures.
The IRS treats a single-member LLC as a “disregarded entity,” which means all business income flows directly onto your personal tax return. You don’t file a separate corporate tax return. You report your profit on Schedule C, pay income tax on it, and also pay self-employment tax (15.3% covering Social Security and Medicare) on your net earnings. This simplicity is a major advantage when you’re just getting started, but the self-employment tax bite becomes significant as your profits grow, which is where tax elections come in (more on that below).
Multi-Member LLC: Best for Partnerships
When two or more people co-own a business, a multi-member LLC is the standard choice. It provides the same liability protection as a single-member LLC but adds structure around how profits, losses, and decisions are shared among owners (called “members”).
You’ll need an operating agreement, and this document is non-negotiable in practice even if your state doesn’t legally require one. It spells out each member’s ownership percentage, voting rights, profit-sharing arrangement, and what happens if someone wants to leave or a dispute arises. Skipping this step is one of the fastest ways to destroy a business partnership.
For taxes, a multi-member LLC files Form 1065 with the IRS as an informational return. Each member then receives a Schedule K-1 showing their share of the profits, which they report on their personal tax returns. The LLC itself doesn’t pay federal income tax. Members do pay self-employment tax on their share of earnings, just like a single-member LLC owner.
Series LLC: Best for Separating Assets
A series LLC works like an umbrella with separate compartments underneath it. Each “series” holds its own assets, liabilities, and sometimes its own members. If one series gets sued or fails, the others are protected. This structure is popular among real estate investors who want to hold multiple rental properties under one LLC without one property’s legal problems threatening the rest.
The catch: not all states recognize series LLCs. If your state doesn’t allow them, you’d need to form one in a state that does and then register as a foreign LLC in your home state, which adds cost and complexity. Check your secretary of state’s website before going this route.
Professional LLC: Required for Licensed Professions
If you’re a doctor, lawyer, accountant, architect, dentist, psychologist, or another licensed professional, your state may require you to form a Professional LLC (PLLC) instead of a standard LLC. The rules vary significantly by state. Some states mandate PLLCs for a long list of professions including engineers, veterinarians, social workers, and physical therapists. Other states don’t have PLLC statutes at all and let professionals use a standard LLC.
A PLLC works like a regular LLC in most respects, with one key difference: it doesn’t shield you from malpractice claims arising from your own professional work. It does protect your personal assets from the business’s general debts and from malpractice committed by a partner or colleague. All members of a PLLC typically must hold the same professional license.
How Your Tax Election Changes the Math
The LLC type you choose is one decision. How that LLC gets taxed is a separate decision, and it can save you thousands of dollars per year.
By default, LLCs pay taxes as pass-through entities, meaning all profits are subject to both income tax and self-employment tax. But once your business consistently earns enough, you can elect to have your LLC taxed as an S-Corp. This lets you split your income into two buckets: a reasonable salary (which gets hit with payroll taxes) and distributions (which don’t). The breakeven point is roughly $50,000 to $60,000 in annual net profit. Below that, the added costs of running payroll, filing a separate S-Corp tax return, and potentially hiring an accountant outweigh the self-employment tax savings.
For example, if your LLC earns $100,000 in profit and you pay yourself a $50,000 salary, you’d owe payroll taxes on the $50,000 salary but avoid self-employment tax on the other $50,000 in distributions. That can save you roughly $7,500 per year. You don’t need to form a new entity to do this. You file Form 2553 with the IRS to elect S-Corp tax treatment while keeping your LLC structure intact.
Where You Form Your LLC Matters
For most small business owners, forming your LLC in your home state is the best and cheapest option. If you form in a different state, you’ll still need to register as a “foreign LLC” in the state where you actually do business, which means paying two sets of fees and maintaining compliance in two states.
That said, certain states offer meaningful advantages if you’re planning to operate remotely, hold assets across state lines, or prioritize privacy.
Wyoming stands out for asset protection and low costs. Formation costs $100, annual reports run $60, and the state has no income tax, no franchise tax, and strong privacy laws. Only your registered agent’s information appears in public records, not your personal name or address. Wyoming courts have also historically provided strong charging order protection, meaning a creditor who wins a judgment against you personally can only claim distributions from your LLC membership interest, not seize the LLC’s assets or force a sale.
Delaware charges $110 to form an LLC and has no annual report requirement, but it does impose a $300 annual franchise tax. Delaware’s appeal is its well-established business court system (the Court of Chancery) and strict privacy protections that keep member information out of public records. It’s favored by larger companies and startups seeking investors, but the franchise tax makes it less attractive for very small operations.
New Mexico offers the lowest entry cost at $50 for formation, with no annual report requirement and no franchise tax. Filings are processed online in one to three days.
Keep in mind that these advantages only matter if you’re not also paying your home state’s fees on top. A Wyoming LLC operated from a state with its own registration requirements means you’re paying Wyoming’s fees plus your home state’s foreign LLC registration and annual fees.
Formation Costs and Ongoing Fees
Initial LLC filing fees across states typically range from $50 to $500. The recurring annual costs vary even more. Some states charge nothing for annual reports while others charge several hundred dollars. Nevada, for example, charges $150 for its annual list filing plus a $200 state business license fee, totaling $350 per year. Wyoming charges just $60. Several states like Texas charge $0 for annual filings.
Beyond state fees, budget for a registered agent service ($100 to $300 per year if you don’t serve as your own), an operating agreement (free if you draft it yourself using a template, $500 to $1,500 if you hire an attorney), and a separate business bank account. If you elect S-Corp taxation, add the cost of payroll software or a payroll service ($30 to $150 per month) and a more complex annual tax return.
Matching Your LLC Type to Your Business
If you’re a freelancer, consultant, or solo e-commerce seller earning under $50,000, a single-member LLC with default tax treatment keeps things simple and cheap. Once your profits consistently clear $60,000 or more, consider the S-Corp election to reduce self-employment taxes.
If you’re launching a business with partners, a multi-member LLC with a thorough operating agreement is essential. Spend the time (and money, if needed) to get the operating agreement right. It should cover what happens if a member dies, becomes disabled, wants to sell their share, or simply wants out.
If you’re investing in real estate with multiple properties, a series LLC (where available) or separate LLCs for each property gives you compartmentalized liability protection. If you’re a licensed professional, check whether your state requires a PLLC before filing anything else.
For most people, the best LLC to start is the simplest one that fits your situation right now. You can always add complexity later: bring in members, elect S-Corp status, or restructure as your business grows. Starting with unnecessary complexity costs money and creates compliance burdens you don’t need yet.