How to Start an LLC, Step by Step

A limited liability company (LLC) is a business structure created under state law. This guide walks through forming one in the United States, in the order most people do it, and points to the official sources and our free tools. It is general information, not legal or tax advice.

Is an LLC right for you?

The IRS describes an LLC as a business structure allowed by state statute, with each state setting its own regulations. Owners are called members, and most states allow a single owner. A few kinds of business, such as banks and insurance companies, generally cannot be LLCs.

An LLC’s federal tax treatment depends on its members and elections. The IRS says a domestic LLC with at least two members is classified as a partnership for federal income tax unless it files Form 8832 and elects otherwise, and a single-member LLC is treated as part of its owner’s tax return unless it elects to be treated as a corporation. State taxes and fees are separate. If you are unsure whether an LLC fits your situation, talk to an attorney or tax professional.

Step 1: Choose your state

You file with a state, and each state sets its own formation fee and its own recurring report or tax. Many owners form in the state where they live or operate. An LLC formed in one state that does business in another may have to register there too, which adds fees, so check the rules of the state where you actually operate.

Use our LLC cost by state calculator to compare formation and recurring fees. Every fee we show links to the official page we checked, and any state we could not verify links to the state instead of showing a number.

Step 2: Pick and check a name

Your name has to be distinguishable from other businesses on your state’s records, and most states require a designator such as “LLC”. Our business name generator can give you ideas, but it does not check availability. Search your state’s business records, search the US trademark database, and check the domain before you commit.

Step 3: Appoint a registered agent

A registered agent receives legal notices and official documents for your LLC during business hours. LegalZoom’s formation page notes that most states require one. Depending on your state’s rules you may be able to act as your own agent, use someone you trust, or pay a service. If a formation service includes a registered agent for the first year, check what it costs afterwards.

Step 4: File your formation document

You file a document with the state, called Articles of Organization in many states and a Certificate of Formation or Certificate of Organization in others. You can file online, by mail or sometimes in person, and some states offer expedited service for an extra fee. Fees and processing times are published on each state’s site.

You can file directly with the state yourself, or pay a formation service to prepare and file it. We compare ZenBusiness, LegalZoom, Bizee and Northwest Registered Agent from their published pricing on Best LLC formation services.

Step 5: Write an operating agreement

An operating agreement sets out how your LLC is run, such as ownership shares and how decisions are made. Requirements vary by state, and some states do not require one, but it is widely recommended, especially with more than one member. Some formation packages include a template. If your situation is complicated, an attorney can help.

Step 6: Get an EIN from the IRS, free

An Employer Identification Number identifies your business for federal tax purposes and is usually needed to open a business bank account. The IRS lets you apply online for free. Its page says the application must be completed in one session, that it needs the Social Security number or ITIN of the responsible party, and that you never have to pay a fee for an EIN. Beware of sites that charge for one.

Step 7: Open a business bank account

The SBA says to open a business account when you are ready to start accepting or spending money, and that a separate account helps you stay compliant and protected. We compare Mercury, Relay, Bluevine and Wise Business from their published terms on Best business bank accounts. Banks ask for documents such as your EIN confirmation letter and formation documents, and requirements differ by provider.

Step 8: Get licenses, permits and tax IDs

The SBA notes that most businesses need to get tax ID numbers and file for the appropriate licenses and permits, which can be federal, state or local depending on what you do. Check your state and city requirements, and any state tax registrations such as sales tax if you sell goods.

Step 9: Stay compliant

Forming the LLC is not the end. Most states require a periodic report or fee, and some charge a franchise or license tax. Our calculator shows the recurring fee for the states we could verify. Keep your registered agent current, keep business and personal money separate, and calendar your state deadlines. FinCEN’s page says U.S. companies are currently exempt from Beneficial Ownership Information reporting under its final rule, but check the page for any change.