How to Form an LLC
Nine steps, a $50-500 filing fee, and about an afternoon of work. Here's every step from choosing your state to opening your first business bank account.
Sara Blakely spent almost a year developing the prototype for Spanx before she ever touched a piece of paperwork. She was cold-calling manufacturers, getting doors slammed in her face, and sneaking her prototype into QVC pitches in her spare time. She didn’t form a business entity until the product had real commercial potential and she needed to actually sell something. That’s the right instinct. The moment an idea starts making contact with the world, the structure has to follow.
That’s the moment this guide is for.
Forming an LLC costs between $50 and $500 depending on your state, takes about an afternoon, and gives your business a legal identity separate from your own. If someone sues your business, they can’t come after your personal savings. If your business owes money, your landlord can’t take your car. That separation is the reason to form one.
Here’s how to do it.
Step 1: Choose Your State
Most founders should form in the state where they live and work. This is the straightforward answer, and it’s usually the right one.
The reason Delaware is famous for business formation has to do with corporations seeking venture capital, not LLCs. Investors in large deals expect Delaware C-corps because of its well-established business court system and investor-friendly laws. For most small LLCs, that’s irrelevant. If you form in Delaware but you live in California, you’ll register as a “foreign LLC” in California, pay California fees, and file California annual reports on top of Delaware’s. You’re paying twice for no benefit.
Wyoming is worth considering if you run a fully online business with no physical presence in a high-fee state. Wyoming charges a $102 annual fee, has no state income tax, and has some of the strongest privacy protections in the country. If you live in California (which charges a minimum $800 annual franchise tax) but your business is fully digital and you have no employees or inventory in the state, Wyoming’s lower costs can add up.
For everyone else: file where you live.
Step 2: Check Name Availability
Before you file anything, confirm that your business name is available in your state. Every state has a business entity search tool on the Secretary of State’s website. Search for your proposed name there first.
A few things to know. Your LLC name must include “LLC,” “L.L.C.,” or “Limited Liability Company.” You can’t use words like “bank,” “insurance,” or “university” without additional approvals. Most states also prohibit names that are confusingly similar to existing registered businesses.
After you check the state database, run a trademark search through the USPTO’s TESS database at tess.uspto.gov. Select Basic Word Mark Search (Free Form), type your proposed name, and look through the results. You’re looking for any live or pending registration in a category that overlaps with yours. A registered trademark doesn’t prevent you from forming the LLC, but it does mean you could face a cease and desist letter down the road. Better to know now.
If the name is available on both, you own it when you file. Some states let you reserve a name for 30-120 days for a small fee while you finish preparing your paperwork.
Step 3: Appoint a Registered Agent
Every LLC is required to designate a registered agent: a person or company with a physical street address in the state of formation who is available during business hours to receive legal documents, tax notices, and government correspondence on the LLC’s behalf.
You have three options. You can serve as your own registered agent, which costs nothing but means your name and address become part of the public record and you have to be available at that address during business hours. You can use an attorney. Or you can use a registered agent service, which typically costs $50-150 per year and keeps your personal address off public filings. Northwest Registered Agent, ZenBusiness, and Registered Agents Inc. are commonly used services with strong reputations. See our registered agent reference for a full breakdown.
For a home-based business, a registered agent service is almost always worth the annual fee. Your home address is otherwise searchable by anyone who looks up your business.
Step 4: File Articles of Organization
This is the official formation document. California calls it Articles of Organization. Delaware calls it Certificate of Formation. Other states use similar names, but the function is the same: it’s the filing that legally creates your LLC.
File online through your state’s Secretary of State website. Searching “[your state] Secretary of State LLC filing” will get you there. Most state sites have an online filing portal. The information you’ll need to provide is straightforward:
- Your proposed LLC name (including the LLC designator)
- Your registered agent’s name and address
- Your name and address (as the organizer)
- The business purpose (nearly every state accepts “any lawful purpose”)
Filing fees range from $50 in Kentucky to $500 in Massachusetts. The majority of states charge between $100 and $200. Processing time is typically 1-5 business days for online filings. Most states offer expedited processing (same-day or 24 hours) for an additional fee, usually $50-100, if you need it faster.
Once approved, you’ll receive a stamped copy of your Articles of Organization. Save it. You’ll need it to open a bank account.
Step 5: Write Your Operating Agreement
Most states don’t legally require an operating agreement, but you need one anyway. This is the internal document that governs how your LLC actually operates: how profits and losses are divided, how decisions get made, what happens if a member wants to leave, and what happens if the business dissolves.
Without an operating agreement, your state’s default LLC rules apply, which may not reflect how you actually want to run things.
For a single-member LLC, a template works well. There are free and low-cost templates on sites like LegalZoom, Rocket Lawyer, and the website of most state bar associations. For a multi-member LLC, especially one where different members are contributing different amounts of money, time, or expertise, having an attorney draft or review the agreement is worth the cost. Disputes between LLC members without a clear operating agreement can get expensive fast.
See our operating agreement reference for what to include.
Step 6: Get Your EIN
An Employer Identification Number is essentially a Social Security number for your business. The IRS issues them for free, and you need one to open a business bank account, hire employees, file certain taxes, and work with many vendors and payment processors.
Apply through the IRS website at irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online. The application is free and available weekdays from 7 a.m. to 10 p.m. Eastern. Walk through it step by step:
- Click “Apply Online Now”
- Select “Limited Liability Company” as your entity type
- Indicate how many members your LLC has
- Answer the responsible party questions (this is you)
- Confirm your LLC name and address
- Submit
The IRS issues your EIN immediately upon completion. Write it down and save the confirmation page as a PDF. The IRS does not resend EIN confirmation letters. If you lose it, you’ll have to call and wait.
See our EIN reference for more detail on how EINs are used in taxes and hiring.
Step 7: Open a Business Bank Account
This step is non-negotiable, and worth doing before it feels urgent.
The legal protection an LLC provides only holds if you actually maintain the separation between your personal finances and your business finances. Mixing the two, using your personal account to pay business expenses, depositing business income into your personal account, creates a paper trail that courts can use to “pierce the corporate veil,” which means holding you personally liable for business debts or judgments. The LLC protection disappears if you don’t treat the LLC like a real, separate thing.
To open a business bank account, you’ll typically need your Articles of Organization, your EIN, and a government-issued ID. Most traditional banks charge monthly fees and require minimum balances. Mercury and Relay are popular online-first business banking options with no minimum balance and free accounts. Mercury also integrates well with accounting software and is widely used by early-stage businesses. Both are FDIC-insured.
Once the account is open, all business income goes in and all business expenses come out. Full stop.
Step 8: Check for Local Licenses and Permits
Forming an LLC creates your legal business entity. It does not automatically authorize you to operate in every state, city, or industry.
Most states require a general business license in addition to the LLC filing. Some counties and cities require their own licenses, especially for businesses operating out of a home. A home occupation permit is often required if clients come to your house, you have employees working on-site, or your business generates traffic (deliveries, visitors) that a typical residence wouldn’t.
Certain industries have additional requirements at the state level: food businesses need health department permits, financial services businesses need state licenses, health and wellness practitioners often need professional licenses. The SBA’s business license and permit lookup tool at sba.gov/business-guide/launch-your-business/apply-licenses-permits lets you search by state and business type.
Operating without required licenses can result in fines or forced closure, so it’s worth doing this check before you officially start doing business.
Step 9: Understand Your Annual Requirements
Forming an LLC is a one-time event. Maintaining it is ongoing.
Most states require an annual or biennial report confirming your LLC’s contact information and registered agent. Many charge annual fees on top of the filing fee. Missing the annual filing can result in your LLC being labeled “delinquent” or, in some states, automatically dissolved.
Some states to know about:
- California: $800 minimum annual franchise tax, due every year regardless of revenue. This is why some California-based businesses look at Wyoming or other states.
- Delaware: $300 minimum annual report fee.
- Wyoming: $60 minimum annual report fee.
- Texas: No state income tax, but a franchise tax applies to revenue over $2.47 million.
- Florida: $138.75 annual report fee.
Your state’s Secretary of State website will list your filing deadlines once your LLC is registered. Set a reminder for at least 30 days before the deadline. Missing it by even a day can trigger late fees.
What Comes Next
Once your LLC is formed, the structure is set. The bank account is open, the EIN is issued, the operating agreement is signed. Your business has a legal identity separate from your own.
Now it has to fill that structure with something real.
Most founders find that the paperwork they dreaded for months took an afternoon. The harder work is what follows: the product, the customers, the income, the decisions about how the business actually runs. The LLC just makes sure that when things get real, you’re protected while you figure it out.
State Filing Fee Reference
| State | Filing Fee | Annual Report Fee |
|---|---|---|
| California | $70 | $800 minimum franchise tax |
| Delaware | $90 | $300 |
| Florida | $125 | $138.75 |
| New York | $200 | $9 biennial |
| Texas | $300 | Franchise tax (varies) |
| Wyoming | $102 | $60 minimum |
| Kentucky | $40 | $15 |
| Massachusetts | $500 | $500 |
Fees change. Verify current amounts on your state’s Secretary of State website before filing.
Sources
- IRS, “Apply for an Employer Identification Number (EIN) Online”. Application process and eligibility requirements.
- SBA, “Apply for Licenses and Permits”. State and local licensing requirements by business type.
- USPTO TESS. Trademark search database for checking name conflicts before filing.
- Wyoming Secretary of State, “Business Division”. Wyoming LLC formation fees and annual report requirements.
- California Franchise Tax Board, “LLC Fees”. California annual franchise tax requirements for LLCs.
- Northwest Registered Agent. Registered agent service used as a reference for pricing and service features.