Before You Start: Is an LLC Right for You?
An LLC (Limited Liability Company) is the most popular business structure in the U.S. for a simple reason: it gives you the personal asset protection of a corporation with the easy, pass-through taxes of a sole proprietorship. If your business is sued or runs up debt, your personal assets — your home, your car, your savings — are generally shielded.
You probably want an LLC if you're earning income from a business, taking on any kind of risk or liability, working with clients or customers, or you simply want your business to look more credible. If you're testing a tiny side idea that earns almost nothing, you can wait — but the moment real money or real risk is involved, an LLC is worth it. For a deeper comparison, see our guides on LLC vs sole proprietorship and whether you actually need an LLC.
The process below is the same in every state. Only the form names, fees, and the agency you file with change. Let's walk through all six steps.
Step 1
Name Your LLC
Your LLC name has to do two things: be available in your state, and follow your state's naming rules. Every state requires the name to include a designator such as "LLC," "L.L.C.," or "Limited Liability Company." It also can't be confusingly similar to a business already registered in that state.
Check availability for free using your state's official business name search (usually run by the Secretary of State). While you're at it, confirm a matching domain name is available so your website, email, and brand line up. You generally don't need to pay to "reserve" a name — it's locked in automatically when your formation document is approved.
Ahmad Adil's TakePick a name you can live with for years. Changing it later means filing an amendment and updating your bank, EIN records, and contracts. Keep it simple and check the domain before you commit.
Step 2
Choose a Registered Agent
A registered agent is the person or company that receives legal documents and official state mail for your LLC. Every state requires one, and the agent must have a physical street address in the state (not a P.O. box) and be available during normal business hours.
You have two options. You can be your own registered agent for free if you live in the state and don't mind your address being on the public record. Or you can hire a registered agent service (typically $100–$300 per year) to keep your home address private and make sure you never miss a legal notice.
Why people use a serviceIf you're sued, the papers get delivered to your registered agent's address. Most owners would rather that not happen at their home or in front of customers — and a service keeps your address off public databases.
Step 3
File Your Articles of Organization
This is the step that legally creates your LLC. You file a document called the Articles of Organization (some states call it a Certificate of Formation or Certificate of Organization) with your state and pay a one-time filing fee. Filing online is almost always the fastest option.
The form is short. You'll typically provide your LLC name, your registered agent's name and address, your business address, and whether the LLC is member-managed or manager-managed. The state fee ranges from $35 in Montana to $500 in Massachusetts, with most states between $50 and $150. Check the exact, verified fee for your state on our LLC filing fees by state page.
Have Northwest file it for you — $39 + state feeStep 4
Create an Operating Agreement
An operating agreement is an internal document that spells out who owns the LLC, how profits are split, how decisions get made, and what happens if a member leaves. Most states don't require you to file it — but you should still have one, even as a single-member LLC.
Why? It reinforces that your LLC is a separate entity (which strengthens your liability protection), it's often required to open a business bank account, and it prevents disputes between co-owners down the road. You don't need a lawyer for a standard agreement — a solid free template works for most small businesses.
- Defines ownership percentages and voting rights
- Sets rules for profit distributions and adding members
- Helps preserve your limited liability protection
Step 5
Get Your EIN (It's Free)
An EIN (Employer Identification Number) is your business's federal tax ID — like a Social Security number for your LLC. You'll need one to open a business bank account, hire employees, or elect a different tax treatment. Even most single-member LLCs get one so they don't have to hand out their personal SSN.
An EIN is always freeGet it directly from the IRS at IRS.gov in minutes. Never pay a third-party site that charges for an EIN — it's a free government service. See our EIN guide for the exact steps.
Step 6
Open a Business Bank Account
This final step is the one people skip — and it's the one that can quietly destroy your liability protection. To keep your personal and business finances legally separate, you need a dedicated business bank account. If you mix personal and business money ("commingling funds"), a court can disregard your LLC and hold you personally liable — known as "piercing the corporate veil."
To open one, bring your approved Articles of Organization, your EIN confirmation, and your operating agreement. Then run all business income and expenses through that account and pay yourself with clean transfers. See how to pay yourself from an LLC.
What Does It Cost to Start an LLC?
Your only mandatory cost is the state filing fee. Everything else is either free or optional. Here's the realistic 2026 breakdown:
| Item | Required? | 2026 Cost |
|---|---|---|
| State filing fee (Articles of Organization) | Yes — one time | $35–$500 |
| Registered agent | Required role, free if DIY | $0–$300/yr |
| Operating agreement | Recommended | $0 (template) |
| EIN from the IRS | Usually needed | $0 |
| Annual report / franchise fee | Most states | $0–$800+/yr |
| Name reservation / DBA / expedite | Optional | varies |
So a bare-bones DIY LLC can cost as little as the state filing fee alone. The biggest ongoing cost in some states is the annual report or franchise fee — for example, California charges an $800 minimum annual franchise tax. Compare every state on our LLC annual fees by state page.
Which State Should You Form In?
For the vast majority of people, the answer is simple: form your LLC in the state where you live and run your business. The "form in Wyoming or Delaware to save money" advice you'll see everywhere usually backfires for ordinary businesses.
Here's why. If you form in another state but operate from your home state, you're legally "transacting business" at home and must register there as a foreign LLC anyway. Now you're paying filing fees, annual fees, and registered agent fees in two states, with double the paperwork — and you've saved nothing.
Ahmad Adil's TakeIf you genuinely want an out-of-state LLC for privacy or because you invest in property elsewhere, Wyoming is the strongest choice — low fees, strong privacy, and solid asset protection. It beats Nevada on cost on nearly every metric. But for a normal business run from home, your home state wins. Read the full best state to form an LLC analysis.
How Is an LLC Taxed?
By default, an LLC is a "pass-through" entity — the business itself pays no federal income tax. Profits pass through to the owners and are reported on their personal returns. A single-member LLC is taxed like a sole proprietorship; a multi-member LLC is taxed like a partnership.
The catch is self-employment tax. In 2026, the self-employment tax rate is 15.3% (12.4% Social Security up to the $184,500 wage base, plus 2.9% Medicare with no cap), applied to 92.35% of your net business profit. You may also qualify for the 20% Qualified Business Income (QBI) deduction.
Once your profits are consistently high — often in the $40,000–$80,000+ range — you can elect to have your LLC taxed as an S-Corp to reduce self-employment tax. It adds payroll costs and paperwork, so it's only worth it above a certain income. Our S-Corp guide breaks down exactly when the math works.
After Formation: Staying Compliant
Forming the LLC is the start, not the finish. To keep it in good standing:
- File your annual (or biennial) report and pay any state fee on time
- Keep business and personal finances strictly separate
- Get any required business licenses or permits for your industry and city
- Pay quarterly estimated taxes if you expect to owe
What about the FinCEN BOI report?Under FinCEN's March 2025 interim final rule, LLCs formed in the U.S. are currently exempt from filing a Beneficial Ownership Information (BOI) report — the requirement now applies mainly to foreign-formed entities. This is an interim rule that could change, so confirm the current requirement on FinCEN's official website before relying on it.
That's the entire process. Ready to do it for your state? Pick yours from our state guides for exact forms, fees, and deadlines — or start with the service I recommend below.
- ✓Articles of Organization prepared and filed with your state
- ✓1 FREE year of Registered Agent service (worth $125)
- ✓Privacy by Default — your home address stays off public records
- ✓No upsells, no hidden fees — real humans answer the phone
Disclosure: LLC School may earn a commission if you use our link to Northwest, at no extra cost to you. This keeps our guides free. See our advertising disclosure.
Starting an LLC — FAQs
Ahmad Adil is the founder and CEO of LLC School — America's fastest-growing free LLC education platform. He has spent years researching LLC formation laws across all 50 U.S. states, helping over 500,000 entrepreneurs start and protect their businesses. Every article on LLC School is personally written, researched, and verified by Ahmad against official state and IRS sources.
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