A complete guide to forming a Limited Liability Company, covering state filing, operating agreements, EIN registration, and compliance requirements for new business owners.
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Pre-Formation Planning
Choose your LLC's business name
Search your state's business name database to confirm availability. Most states require the name to include 'LLC' or 'Limited Liability Company' and prohibit words like 'bank' or 'insurance' without special licensing.
Run a name availability search on your state's Secretary of State website
Check for matching domain name availability
Decide on a single-member or multi-member structure
Single-member LLCs are taxed as sole proprietorships by default, while multi-member LLCs are taxed as partnerships. Either can elect S-corp or C-corp taxation by filing IRS Form 2553 or 8832.
Select the state where you will form the LLC
Most small businesses should form in their home state to avoid paying franchise taxes and registered agent fees in two states. Delaware and Wyoming offer advantages primarily for venture-backed or multi-state companies.
Appoint a registered agent
Your registered agent must have a physical street address in the state of formation and be available during business hours. Commercial registered agent services typically cost $50-$300 per year.
State Filing and Registration
Prepare and file your Articles of Organization
Filing fees range from $50 in states like Kentucky to $500 in Massachusetts. Most states process online filings within 5-10 business days, with expedited options available for an additional $50-$100.
Include LLC name, registered agent, and principal office address
Specify whether the LLC is member-managed or manager-managed
Obtain a certified copy of your filed Articles
Request at least 2 certified copies when filing — banks and landlords often require them. Certified copies typically cost $5-$20 per copy from the Secretary of State's office.
File for foreign qualification if operating in other states
If your LLC has employees, a physical office, or regularly conducts business in another state, you likely need foreign qualification there. Fees mirror domestic filing fees, typically $100-$300 per state.
Publish a formation notice if required by your state
New York and Arizona require LLC formation notices in local newspapers. In New York, this can cost $500-$2,000 depending on the county, and must be completed within 120 days of filing.
Operating Agreement and Internal Docs
Draft and sign an operating agreement
Even single-member LLCs should have an operating agreement — it strengthens your liability protection in court. Cover profit distribution, voting rights, and what happens if a member wants to leave.
Define member ownership percentages and capital contributions
Specify management structure and decision-making rules
Include dissolution and buyout provisions
Create an LLC record book
Keep your Articles of Organization, operating agreement, EIN letter, meeting minutes, and financial records in one organized location. Digital storage with cloud backup works just as well as a physical binder.
Set up a member meeting schedule
Multi-member LLCs should hold at least 1 formal meeting per year and document decisions in written minutes. This habit helps maintain the corporate veil that protects your personal assets.
Tax and Financial Setup
Apply for a federal Employer Identification Number (EIN)
Apply online at IRS.gov for free and receive your EIN immediately. You need an EIN to open a business bank account, hire employees, and file business tax returns — even if you have no employees yet.
Register for state and local tax accounts
Most states require separate registrations for income tax withholding, sales tax, and unemployment insurance. Check your state's Department of Revenue website for a consolidated business tax registration form.
Register for state income tax withholding if you have employees
Register for sales tax permit if selling taxable goods or services
Open a dedicated business bank account
Never mix personal and business funds — commingling is the number one reason courts pierce the LLC veil. Most banks require your EIN, Articles of Organization, and operating agreement to open an account.
Choose your tax classification with the IRS
The default classification works for most new LLCs. If your net income exceeds $40,000-$50,000 annually, consult a CPA about electing S-corp status to potentially save 15.3% in self-employment taxes on distributions.
Licenses, Permits, and Compliance
Obtain required business licenses and permits
Use the SBA's license and permit lookup tool to identify federal, state, and local requirements. Common permits include general business licenses ($50-$400), professional licenses, and zoning permits.
Check city or county business license requirements
Verify industry-specific licensing needs
Set up annual report filing reminders
Most states require annual or biennial reports with fees ranging from $0 to $300. Missing a filing deadline can result in administrative dissolution of your LLC, which is costly to reverse.
Obtain business insurance
General liability insurance for small LLCs typically costs $400-$1,500 per year. Even though the LLC structure limits personal liability, insurance covers claims that exceed your LLC's assets.
Post required workplace notices if hiring employees
Federal and state labor law posters must be displayed where employees can easily see them. The Department of Labor provides free federal posters, and most state labor departments provide free state-specific versions.
Frequently Asked Questions
How much does it cost to form an LLC?
State filing fees range from $40 (Kentucky) to $500 (Massachusetts), with most states charging between $50 and $200. On top of the filing fee, you may pay $100-$300 for a registered agent service and $200-$1,000+ if you hire an attorney to draft your operating agreement. Online formation services like ZenBusiness or Northwest charge $0-$299 plus the state fee.
How long does it take to get an LLC approved?
Processing times vary by state. Wyoming and Delaware often approve filings within 1-2 business days online. California and New York can take 4-6 weeks for standard processing. Most states offer expedited processing for an additional $50-$250, which cuts the timeline to 1-5 business days.
Do I need an operating agreement for a single-member LLC?
While only a few states legally require one, having a written operating agreement strengthens your liability protection even as a solo owner. Courts have used the absence of an operating agreement as evidence that the LLC is not a separate entity, which can lead to piercing the corporate veil. Banks also frequently request one when opening a business account.
What is the difference between an LLC and an S-Corp?
An LLC is a legal entity type formed at the state level, while an S-Corp is a federal tax election (IRS Form 2553) that any LLC or corporation can choose. Single-member LLCs default to sole proprietorship taxation, and multi-member LLCs default to partnership taxation. Electing S-Corp status can save 15.3% in self-employment taxes on profits above a reasonable salary, which typically becomes worthwhile when net income exceeds $60,000-$80,000 annually.
Can I form an LLC in a different state than where I live?
Yes, but it often creates extra costs. If you form in Delaware or Wyoming for their favorable laws but operate in your home state, you will need to register as a foreign LLC in your home state too — paying filing fees, annual reports, and registered agent fees in both states. For most small businesses earning under $500,000 annually, forming in your home state is simpler and cheaper.