How to Form an LLC

Create an LLC in 6 Easy Steps

Setting up a limited liability company (LLC) is easy. You can start an LLC with our free state guides and save hundreds of dollars on legal fees.

  1. Select Your State
  2. Name Your LLC
  3. Choose a Registered Agent
  4. File Your LLC with the State
  5. Create an LLC Operating Agreement
  6. Get an EIN

Starting an LLC in any State is Simple, just follow these six steps:

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A limited liability company (LLC) is a business structure that offers the benefit of limited liability protection and flexible tax options. Read our step-by-step guide below to learn how to start an LLC today.

Or Simply use a professional service:

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STEP 1: Select Your State

For most new business owners, the best option is to form an LLC in the state where you live and plan to do business in. If your business will have a physical presence (storefronts, offices, sales reps, etc.) in different states, you'll need to register a foreign LLC in those states. Use our state-specific guides below to learn how to start an LLC in your state:

STEP 2: Name Your LLC

Choosing a business name is the first step in forming an LLC. You'll need to complete a business name search online to make sure your LLC name is unique and you'll need to meet your state's naming guidelines. These are some common state LLC naming rules:

  • Your company name must include the phrase "limited liability company," or one of its abbreviations (LLC or L.L.C.).
  • Your company name can't include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
  • Restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual, such as a doctor or lawyer, to be part of your LLC.

To learn more about naming your business, read our How to Name a Business guide.

For business name ideas, check out our Business Name Generator. Then, create a logo with our Free Logo Generator.

STEP 3: Choose a Registered Agent

A registered agent is a person or business that sends and receives legal papers on behalf of your company. These documents include official correspondence like legal summons and state filing notices.

Most states require every business to nominate a registered agent when forming an LLC. Your registered agent must be a resident of the state you're doing business in, or a corporation authorized to conduct business in that state.

Read our What is a Registered Agent article to learn more about choosing a registered agent.

We also recommend hiring a professional registered agent service to provide you with peace of mind and help you stay compliant with the law.

STEP 4: File LLC Articles of Organization

To officially create an LLC, you'll need to file your formation documents with the state's business division, usually the Secretary of State. In some states, the Articles of Organization are known as the Certificate of Formation or Certificate of Organization.

You can complete the information on the formation documents yourself (you can file online or by mail) or hire an LLC formation service to file for you. The average state filing fees are about $100 to start an LLC.

To find out what the Articles of Organization filing fees are for your state, visit our LLC Cost guide.

Member-Managed or Manager-Managed?

Now is a good time to decide whether your LLC will be member-managed or manager-managed. Before choosing a management structure, read our member-managed vs manager-managed guide.

STEP 5: Create an LLC Operating Agreement

An LLC operating agreement is a legal document that outlines the ownership structure and member roles of an LLC.

Although most states don’t officially require you to have an operating agreement, it's still a good idea to create one when forming an LLC. There are six main sections of an operating agreement:

  • Organization
  • Management and Voting
  • Capital Contributions
  • Distributions
  • Membership Changes
  • Dissolution

For a complete online guide as well as free operating agreement templates and a free custom operating agreement tool, read our What is an LLC Operating Agreement article.

STEP 6: Get an EIN

An Employer Identification Number (EIN), also known as a Federal Employer Identification Number (FEIN), or Federal Tax Identification Number (FTIN), is like a Social Security number (SSN) for your LLC. You’ll need an EIN to hire employees or open a business bank account.

You can get your EIN for free on the IRS website, via fax, or by mail. If you’d like to learn more about EINs and how they can benefit your LLC, read our What is an EIN article.

Considering Using an LLC Formation Service?

We reviewed and ranked the top 5 LLC formation services.
Find out which is best for you.

Best LLC Services

Important Steps After Starting an LLC

Separate Personal Assets From Your Business

LLCs offer limited liability protection. Using dedicated business banking and credit accounts is essential to protecting your business' corporate veil

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued.

We recommend opening a business bank account immediately after starting your business. Read our How to Open a Business Checking Account guide to get started.

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Ask us a question, tell us how we're doing, or share your experiences. Join the conversation in our Comment Section.

Register Your LLC for State Taxes

Depending on the nature and location of your business, you may be required to register for several forms of state tax:

  • If you are selling a physical product, you'll typically need to register your company for sales & use tax.
  • If you have employees, you may need to register for unemployment insurance tax and employee withholding tax.

Read our LLC Tax Guide to learn how taxes will impact your business.

Additionally, most states require LLCs to file an annual report, which involves updating your registered agent address and paying your annual fee or franchise tax. Learn how to file your LLC annual report by reading our 50-state guides.

Understand Your LLC’s Federal Tax Options

LLCs are taxed as pass-through entities. Pass-through taxation means that all of the business’s profit passes through to the LLC member’s individual tax returns.

The LLC member then pays self-employment taxes and income tax on their share of the business’s income after any tax deductible expenses are taken out. This is the default way to tax an LLC.

LLCs can also elect to be taxed as S corporations (S corps) or C corporations (C corps). The S corporation tax status allows LLC members to be taxed as employees of the business. This can reduce tax burden in certain circumstances. Visit our LLC vs S Corp guide for more information.

How you pay yourself as an owner will also affect your federal taxes. Visit our guide to learn more about how to pay yourself in an LLC.

Set Up Business Accounting

Having a business accountant will help you take advantage of the tax benefits of an LLC and will save you and your business thousands of dollars in taxes each year.

Starting a relationship with a business accountant as soon as you start your business will ensure that you have the best advice from the very beginning.

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Recommended: Get a free tax consultation and speak with a business accountant today.

Get Licenses and Permits

When you start an LLC, you’ll need to determine if your business needs any licenses or permits to stay compliant. On the federal level, there are a handful of business activities that require licenses and/or permits:

  • Agriculture
  • Alcoholic beverages
  • Aviation
  • Firearms/ammunition
  • Explosives
  • Fish and wildlife
  • Maritime transportation
  • Mining and drilling
  • Nuclear energy
  • Radio/TV broadcasting
  • Transportation and logistics

On the state and local level, business license requirements vary depending on your state of formation, as well as on county and city laws.

To get started on a business licensing search for your LLC, read our business licensing guide.

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Recommended: If you need help with your business license search, you can hire a professional business license service. They'll handle the research and application process for you.

Get Business Insurance

In most states, all businesses with employees (including LLCs and corporations) are required to get workers compensation insurance. Take an in-depth look at this subject in our workers compensation insurance guide.

General liability insurance isn’t typically a legal requirement, but it's strongly recommended. This policy protects your business assets from lawsuits. Without it, a legal claim could force your company out of business.

Follow Hiring Laws

When you decide to hire employees for your LLC, you must follow these legal compliance requirements:

How to Form an LLC FAQ

What is the best business structure for a small business?

Limited liability companies (LLCs) can protect your personal assets and LLCs are the simplest and most affordable legal business entity to form and maintain.

Read our Business Structure guide if you need help choosing the right business type for your small business.

Is it better to start a corporation or LLC for my small business?

A corporation is a complex legal business entity that is run by a board of directors and owned by shareholders. Small business owners will only benefit from starting a corporation if they rely on outside investors or need to exchange stock publicly.

Learn why LLCs are the best legal business entity for most small businesses in our LLC vs Corporation guide.

What are the benefits of an LLC vs sole proprietorship?

Unlike a sole proprietorship, an LLC is a separate entity from the business’s owner. Most sole proprietors would benefit from converting their sole proprietorships to LLCs because LLCs offer liability protection and are inexpensive to start and maintain.

Only businesses with zero liability should operate as sole proprietorships because there isn’t any legal separation between a sole proprietor and the business.

Visit our LLC vs Sole Proprietorship guide for more details.

What are the advantages and disadvantages of an LLC?

Limited liability companies (LLCs) can protect your personal assets and increase your business’s credibility. LLCs are the simplest and most affordable legal business entity to form and maintain.

LLCs aren’t good for attracting investors. If your business relies on outside investors, take a look at our How to Start a Corporation guide.

Can you start an LLC on your own?

Yes, you can start an LLC on your own by following our state-based LLC formation guides. If you would prefer to have a professional service form your LLC, we recommend checking out our review of the Best LLC Services.

What is the average cost to set up an LLC?

The cost of creating an LLC will vary depending on your state. Expect to pay a minimum of between $50 and $500 to form an LLC, and about $100 annually to maintain the LLC.

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