Starting a Limited Liability Company (LLC) is one of the most popular ways to launch a business in the United States — and for good reason. An LLC protects your personal assets, looks professional to customers, and keeps paperwork manageable. The good news: you can form one in under an hour of actual work, even if you have never dealt with business paperwork before.
This guide walks you through every step, in order, with the real costs and the mistakes to avoid.
Step 1: Choose the state for your LLC
For most first-time founders, the answer is simple: your home state. Filing where you live and work avoids paying for a second "foreign qualification" in another state, which can easily double your costs.
That said, three states get special attention for good reasons:
- Wyoming — low fees ($100 filing), no state income tax, strong privacy (members are not listed publicly).
- Delaware — the gold standard for startups planning to raise venture capital, thanks to its business courts.
- New Mexico — the cheapest option overall ($50 filing fee, no annual report).
If you run a local business — a coffee shop, a landscaping company, a freelance practice — file in your home state. If you run an online business and want maximum privacy at low cost, Wyoming is the most popular pick. Our state-by-state fee guide breaks down every state's costs.
Step 2: Pick a name for your LLC
Your LLC name must be unique in your state and include an LLC designator like "LLC" or "Limited Liability Company." Before you fall in love with a name:
- Search your state's business name database (every Secretary of State website has one) to confirm availability.
- Check the domain name — even if you are not building a website today, owning YourName.com matters.
- Check trademarks with a quick search of the USPTO database to avoid conflicts with existing brands.
Most states let you reserve a name for a small fee ($10–$50) if you are not ready to file yet.
Step 3: Appoint a registered agent
Every state requires your LLC to designate a registered agent — a person or company with a physical address in the state who receives legal documents and official mail on your behalf.
You have three options:
- Be your own agent (free, but your home address goes on public record and you must be available during business hours).
- Ask a friend or family member (free, but unreliable and awkward).
- Hire a registered agent service ($100–$200/year — private, reliable, and they scan and forward your mail).
For most founders, hiring a service is worth it for the privacy alone. Several formation services bundle a free first year of registered agent service with formation. Read our registered agent guide for the full breakdown.
Step 4: File your Articles of Organization
This is the actual "formation" step. The Articles of Organization (called a Certificate of Formation in some states) is a short document — usually one or two pages — that officially creates your LLC. It typically asks for:
- Your LLC's name
- Your registered agent's name and address
- Your business address
- The names of organizers or members (varies by state)
- Your business purpose (a general statement is fine)
You file it with the Secretary of State, online or by mail. Filing fees range from $50 to $500 depending on the state. Processing takes anywhere from one business day to several weeks; most states offer expedited processing for an extra fee if you are in a hurry.
You can file yourself directly with the state (cheapest), or use a formation service that handles the paperwork and checks it for errors. Our comparison of the top services shows which ones are worth it.
Step 5: Create an operating agreement
An operating agreement is your LLC's internal rulebook: who owns what percentage, how profits are split, how decisions get made, and what happens if someone leaves. Most states do not legally require one for a single-member LLC — but you should still have one.
Why? Banks often ask for it when you open a business account. Courts take your LLC more seriously as a separate entity when you have one. And if you ever add a partner, you will be glad the rules were written down in advance.
You do not need a lawyer for a simple single-member agreement — reputable templates work fine. Our operating agreement guide includes a checklist of what to cover.
Step 6: Get your EIN from the IRS
An Employer Identification Number (EIN) is like a Social Security number for your business. You need one to open a business bank account, hire employees, and file business taxes.
It is completely free and takes about 15 minutes through the IRS online application. Never pay a formation company $50 or more for this — it is one of the most common upsells in the industry. Our EIN guide walks through the application screen by screen.
Step 7: Open a business bank account and stay compliant
Once you have your approved Articles and EIN, open a separate business bank account. Mixing personal and business money is the fastest way to undermine the liability protection you just set up — courts call it "piercing the corporate veil," and it is a real risk.
Ongoing compliance is simple but non-negotiable:
- Annual reports: most states require a yearly filing ($0–$300). Mark the deadline on your calendar.
- Registered agent: keep yours current — if the state cannot reach your agent, your LLC can be dissolved.
- Business licenses: check your city and county requirements; many businesses need a local license on top of the LLC.
- Taxes: an LLC is "pass-through" by default, meaning profits flow to your personal tax return. Set aside 25–30% of profit for taxes.
How much does it all cost?
A realistic first-year budget for a DIY filing in a mid-cost state:
| Item | Typical cost |
|---|---|
| State filing fee | $50–$300 |
| Registered agent service | $0–$200 (often free year one) |
| Operating agreement | $0 (template) |
| EIN | $0 (IRS) |
| Business bank account | $0 |
| Total | $50–$500 |
Using a formation service adds $0–$300 depending on the package, which can be worth it for the convenience and error-checking.
Common mistakes to avoid
- Paying for an EIN. It is free from the IRS. Always.
- Skipping the operating agreement. It takes 30 minutes and protects you for years.
- Forgetting annual reports. A $50 missed filing can snowball into penalties or dissolution.
- Mixing finances. Get the separate bank account on day one.
- Filing in the wrong state. Unless you have a specific reason (privacy, investors), your home state is cheapest.
The bottom line
Forming an LLC is genuinely straightforward: pick a state, name your company, appoint a registered agent, file the Articles, write an operating agreement, get your free EIN, and open a business bank account. Most founders can complete the whole process in a week — the state just needs time to process the paperwork.
If you want help with the filing, our top-rated formation services handle everything for $0 plus state fees. And if you are still deciding whether an LLC is right for you, read Do I Need an LLC? next.