To form an LLC, you complete five state-and-federal steps in sequence: pick a name that your state will accept, appoint a registered agent, file Articles of Organization with the secretary of state, sign an operating agreement among the owners, and get an Employer Identification Number from the IRS. In most states the actual work takes under an hour, and filing fees run from $35 to $500. The harder part is what comes after formation — choosing the right tax classification, keeping annual filings current, and running the business in a way that preserves the liability protection the LLC exists to give you.
Pick a Name Your State Will Accept
Every state requires your LLC name to be distinguishable from entities already on file. Before you commit to a name, search your state’s business registry; most secretaries of state maintain a free online database for this. If the name is already taken or too close to a registered one, your filing will be rejected.
The name also needs a legal designator so the public knows what kind of entity they’re dealing with. Most states accept “LLC,” “L.L.C.,” or the full phrase “Limited Liability Company,” with the exact options varying by jurisdiction.1U.S. Small Business Administration. Choose Your Business Name Some states restrict words like “bank,” “insurance,” or “university” unless you hold the corresponding license.
If you’re not ready to file but want to lock the name in, many states let you reserve it for a set period — commonly 60 to 120 days — for a small fee.
Appoint a Registered Agent
Every LLC must have a registered agent: a person or company authorized to receive legal documents on the LLC’s behalf. If someone sues the business, service of process goes to that agent. Government notices and compliance mail go there too.
The agent must have a physical street address in the state where the LLC is formed (a P.O. box will not work) and must be available during normal business hours year-round. You can serve as your own agent, but your address then goes on the public record and you have to be physically present to accept documents. Commercial registered agent services typically run $50 to $300 per year and keep your personal address off the filing.
If you plan to operate in more than one state, you will need an agent in each state where the LLC is registered.
File the Articles of Organization
The Articles of Organization is the document that actually creates the LLC. It is usually one or two pages, and most states provide a fill-in-the-blank form on the secretary of state’s website. The information required is minimal: the LLC’s name, the registered agent’s name and address, whether the LLC is member-managed or manager-managed, and a mailing address.2U.S. Small Business Administration. Register Your Business
Some states ask you to state the LLC’s purpose; a broad statement like “any lawful business activity” works in most jurisdictions and avoids having to amend later if the business expands. You may also be asked whether the LLC has perpetual duration or a fixed end date. Perpetual is standard unless the entity exists for a defined project.
Member-Managed or Manager-Managed
In a member-managed LLC, every owner participates in day-to-day operations and can bind the company to contracts. This is the default in most states and suits small businesses where all owners are active. A manager-managed structure concentrates authority in one or more designated managers, which fits better when some owners are passive investors.
Fees and Processing Times
Filing fees run from $35 at the low end to $500 at the high end, with most states between $50 and $200. Online filing is available almost everywhere and often processes within minutes. Paper filings by mail can take two to four weeks depending on the office’s backlog. Expedited processing is usually available for an extra fee.
When the state accepts the filing, you receive a stamped copy of the articles or a Certificate of Formation. Keep it safe — banks, landlords, and vendors will ask to see it.
States That Require Newspaper Publication
A handful of states require newly formed LLCs to publish a notice of formation in local newspapers. New York is the most notable: new LLCs must publish in two newspapers, one daily and one weekly, for six consecutive weeks within 120 days of formation. In Manhattan, publication costs alone can exceed $1,500. Arizona and Nebraska also impose publication requirements at generally lower cost. Missing the deadline can result in suspension of the LLC’s authority to do business, so check the rule the moment your filing is approved.
Write an Operating Agreement
The operating agreement is the LLC’s internal rulebook. It’s a private contract among the members, not something you file with the state, and skipping it is one of the most common and costly mistakes new owners make.3U.S. Small Business Administration. Basic Information About Operating Agreements Without one, the LLC falls back on whatever default rules your state’s LLC statute provides, and those defaults rarely match what the owners actually intended.
At a minimum, cover:
- Ownership percentages for each member.
- How profits and losses are allocated (which does not have to track ownership percentages — members can agree to any split).
- Voting rights: which decisions require a majority, which require unanimity, and how votes are weighted.
- Capital contributions each member has made, and whether additional contributions can be required later.
- Transfer restrictions on selling or assigning a membership interest, and whose approval is needed.
- Dissolution procedures: what ends the LLC and how assets are distributed.
Even single-member LLCs benefit from an operating agreement. It reinforces the legal separation between you and the business, which matters if your liability protection is ever challenged in court.
Buy-Sell Provisions for Multi-Member LLCs
Multi-member operating agreements should address what happens when a member leaves. Common triggers include death or disability, retirement, personal bankruptcy, divorce (where an ex-spouse could receive a membership interest in a settlement), or a decision to cash out. Without buy-sell terms, a departing member’s interest can end up with someone the remaining members never agreed to do business with. The agreement should say how the interest is valued and whether the LLC or remaining members have a right to purchase it before it can be transferred to an outsider.
Get an EIN and Any Required Licenses
Once the state approves your LLC, apply for an Employer Identification Number from the IRS. The EIN is a nine-digit tax ID you’ll need to open a business bank account, file tax returns, and hire employees. Applying at IRS.gov is free and takes about five minutes, with the number issued immediately.4Internal Revenue Service. Get an Employer Identification Number You can also apply by fax using Form SS-4 (about four business days) or by mail (four to five weeks).5Internal Revenue Service. Instructions for Form SS-4 Be wary of third-party sites that charge for EIN applications; the IRS issues them for free.
Depending on your industry and location, you may need additional licenses before you can legally operate. Regulated professions such as medicine, law, accounting, and architecture typically require a professional license, and some states require those practitioners to form a Professional LLC (PLLC) rather than a standard LLC. Food service needs health permits, retail may need a sales tax permit, and a physical location often needs an occupancy permit from the municipality.2U.S. Small Business Administration. Register Your Business Ask your local clerk’s office early; operating without required permits can bring fines or forced closure.
Decide How the LLC Will Be Taxed
The IRS has no tax category called “LLC.” Instead, it assigns your LLC a default classification based on how many members it has and lets you elect a different one.
The Default Treatment
A single-member LLC is a “disregarded entity” for income tax purposes: profits and losses flow to the owner’s personal return, typically on Schedule C of Form 1040. A multi-member LLC defaults to partnership taxation, meaning the LLC files an informational Form 1065 but pays no income tax itself; each member reports their share on their personal return.6Internal Revenue Service. LLC Filing as a Corporation or Partnership
Under either default, the LLC’s net earnings are subject to self-employment tax at 15.3% on top of regular income tax.7Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) For a profitable LLC, this is often the tax bill the owner didn’t see coming.
Electing S-Corp Treatment
If your LLC consistently earns more than a reasonable salary for the work you personally do, electing S-Corp tax treatment can cut the self-employment tax bill. You pay yourself a reasonable salary (subject to full payroll taxes), and any remaining profits distributed to you avoid self-employment tax, though they remain subject to regular income tax.
To make the election, file IRS Form 2553 no later than two months and 15 days after the beginning of the tax year you want it to apply, or at any time during the preceding tax year.8Internal Revenue Service. Instructions for Form 2553 The S-Corp election adds payroll compliance and administrative costs, so it generally pays off only when the tax savings exceed those costs. Run the numbers with a tax professional before electing.
Electing C-Corp Treatment
Less commonly, an LLC can elect C-Corporation taxation by filing IRS Form 8832.6Internal Revenue Service. LLC Filing as a Corporation or Partnership Under C-Corp treatment, the LLC pays corporate income tax on its profits and members pay tax again on any dividends — the double taxation you may have heard about. This rarely suits small businesses, but it can fit companies planning to reinvest most profits, raise venture capital, or eventually go public.
Keep the LLC in Good Standing
Forming the LLC is the easy part. Keeping it alive, and keeping its liability protection intact, requires ongoing attention.
Annual Reports and Franchise Taxes
Most states require LLCs to file an annual or biennial report updating basic information like the registered agent’s address and the names of members or managers. Fees range from nothing in a few states to several hundred dollars. Some states also impose a minimum franchise or privilege tax on LLCs regardless of income; one state charges an $800 annual minimum.
Missing these filings is more consequential than it sounds. Late filings trigger penalty fees. Continued noncompliance knocks your LLC out of good standing, which means the state will not issue the certificates that banks, landlords, and business partners commonly require. If the problem goes ignored long enough, the state administratively dissolves the LLC, and people acting on the company’s behalf can be held personally liable for debts incurred while dissolved. In many states another business can claim your LLC’s name during the dissolution period, and reinstatement will not get it back.
Protecting the Liability Shield
The whole point of an LLC is the shield between your personal assets and the business’s debts. That shield only works if you actually treat the LLC as a separate entity. Courts can “pierce the veil” and hold you personally liable if they find you were treating the LLC as an extension of yourself.
The most common factor courts look at is commingling funds: depositing business income into a personal account, paying business expenses from a personal credit card, or otherwise blending finances. Other red flags include the absence of an operating agreement, undercapitalizing the business at formation, and using the LLC to commit fraud.9Legal Information Institute. Piercing the Corporate Veil
Practical habits: open a dedicated business bank account right after you get the EIN, run all business transactions through it, and never pay personal expenses with business funds or business expenses with personal funds. Keep the operating agreement current and document major business decisions. These habits cost nothing and are the difference between a shield that holds and one that collapses when tested.
Foreign Qualification When You Do Business in Another State
If your LLC operates in a state other than the one where it was formed, that state may require you to “foreign qualify” — register there as an out-of-state LLC. Triggers vary, but having employees, an office, or a warehouse in another state almost always requires qualification. Making occasional sales to customers in another state usually does not. Foreign qualification means paperwork and fees in each additional state, plus a registered agent there. Failing to register where required can bring fines and, in some states, the inability to bring a lawsuit in that state’s courts to enforce your contracts.
Beneficial Ownership Reporting
The Corporate Transparency Act originally required most domestic LLCs to file Beneficial Ownership Information reports with FinCEN. As of March 2025, FinCEN exempted all entities formed in the United States from the requirement. Only entities formed under foreign law that have registered to do business in a U.S. state or tribal jurisdiction are now required to file.10Financial Crimes Enforcement Network. FinCEN Removes Beneficial Ownership Reporting Requirements for U.S. Companies and U.S. Persons If you are forming a domestic LLC, you do not need to file a BOI report. This area has shifted repeatedly, so watch for future rulemaking.