The paperwork is the easy part. The decisions are what matter.
An LLC — a limited liability company — is the most common way new business owners in the US turn a side project into a real business. It separates your personal money from the business and gives the business its own legal identity.
Starting one is not complicated, but it is a sequence: you pick a state before you file, and you file before you can open a bank account in the business name. This guide walks through the steps in order.
Choose a state
Most people form their LLC in the state where they actually live and work. For a local business, a freelancer, or an online business run from home, that is usually the right choice.
Forming in another state is sometimes talked about as a way to save money, but it rarely helps a small business. If you form out of state and still operate from home, you will usually need to register in your home state too — two filings, two sets of fees, and two annual reports instead of one. Unless a lawyer advises you otherwise, form where you operate.
Your Secretary of State’s website is the official source for forms, fees, and processing — anything else is a summary.
Pick a name
Your LLC needs a name that no other business in your state is already using, and in most states it must include ‘LLC’ or ‘Limited Liability Company’ at the end.
Before you get attached to a name, run it through your Secretary of State’s free business name search. If the name is taken, or too close to an existing one, the filing will be rejected.
Two checks are worth doing at the same time: see whether the matching domain name is available, and search the US Patent and Trademark Office database for the name in your industry. A name that passes the state search can still cause trouble if another business already owns it as a trademark.
Appoint a registered agent
Every LLC needs a registered agent: a person or company with a physical address in the state who can receive legal papers and official mail for the business during business hours.
You can act as your own registered agent in most states if you have a physical address there and are available during the day. Many owners use a service instead, so the agent’s address — not their home address — goes on the public record. Either way, decide this before you file, since the agent’s name and address go on the form.
File the articles of organization
This is the filing that actually creates the LLC: usually a short form with the business name, the registered agent, the business address, and sometimes the members’ names, submitted to the Secretary of State online or by mail.
Once the state accepts it, you will get a certificate or stamped confirmation back — keep it somewhere safe, since banks and licensing offices will ask for it. Processing times vary by state and by how you file, so check your Secretary of State’s site for current estimates.
Get an EIN from the IRS
An EIN — an employer identification number — is the business’s tax ID, like a Social Security number for the company. You need one to open a business bank account and hire employees.
Apply online through the IRS website — it is free, so ignore third-party sites that charge for one. Apply only after the state has accepted your articles of organization, since the IRS application asks for the formation date.
Write an operating agreement
An operating agreement sets out how your LLC works: who owns what share, who makes decisions, how profits are split, and what happens if a member leaves.
Some states require one, and some do not, but it is worth writing one either way — even if you are the only member. Without it, your state’s default rules decide these questions, and those defaults may not match what you would choose. For two or more members it deserves more care, and a lawyer’s review is money well spent.
If you are starting with a partner, agree on the hard questions now: who puts in how much money, who does the work, and what happens if one of you wants out. Put the answers in writing.
Get the licences and permits you need
Forming the LLC is not the same as being licensed to operate. Depending on what you do and where you do it, you may need a general business licence, a professional licence, a sales tax permit, a health permit, or a home occupation permit.
There is no single list, because requirements come from federal, state, and local level at once. The US Small Business Administration’s website has a licence finder, and your city or county clerk’s office can confirm local requirements. Sorting this out before you take your first paying customer avoids fines and forced closures later.
Open a business bank account
A business bank account is how you make that separation real.
Banks will usually ask for your articles of organization, your EIN, and your operating agreement, so have those ready. Once the account is open, run all business income and expenses through it and pay yourself by transfer, not by dipping in for personal spending — mixing the two is one of the fastest ways to lose the liability protection the LLC is supposed to give you.
Once the business side is in place, our guide to starting a freelance business in 2026 covers first clients and invoices, and our look at side businesses you can start with $500 shows what is realistic on a tight budget.
Taxes and ongoing compliance
An LLC does not pay tax the way a corporation does by default. A single-member LLC is usually taxed as a sole proprietorship, and a multi-member LLC as a partnership, so profits and losses pass through to the owners’ personal tax returns. You can also elect to be taxed as a corporation, but make that call with an accountant.
The ongoing work is modest but real. Most states require an annual report or a similar filing, plus an annual fee, and missing it can lead to penalties or the state dissolving your LLC — so put the due date in your calendar the day you form the company. Keep records too: income, expenses, receipts, and contracts. Good records make tax time straightforward and protect you if anything is ever questioned.
What does it cost to start an LLC?
Costs vary by state, and they vary enough that a single number would mislead you. The main costs are the state filing fee, the annual report fee, and, if you use one, a registered agent service. Some states also charge a publication fee or a franchise tax.
Check your Secretary of State’s website for the current filing and annual fees before you budget, rather than relying on figures that may already be out of date. The same site lists extras such as name reservation or certified copies. Beyond the state fees, the only costs most new owners face are optional: a lawyer’s review of the operating agreement, an accountant’s advice on tax election, and a business bank account.
If you plan to hire help as you grow, our guide to managing a remote team as a small business covers the practical side of bringing people on.
Common mistakes to avoid
Forming in the wrong state. Picking a state because it sounds cheaper, then discovering you still have to register at home, doubles your paperwork and fees. Form where you operate unless you have a clear, advised reason not to.
Mixing personal and business money. Paying personal bills from the business account undermines the separation an LLC exists to create. Open the business account first, then use it for everything business-related.
Skipping the operating agreement. It feels unnecessary when you are the only owner or you and your partner agree on everything. It is the document you will be glad to have the first time you disagree, or a bank asks how the business is run.
Forgetting the annual report. The filing that creates the LLC is a one-time event, but the annual report is not. Miss it and the state can charge penalties or dissolve the company — and you may not notice until you need the LLC for something important.
FAQs
How long does it take to start an LLC?
It depends on your state and how you file — some states process online filings quickly, others take longer, and paper filings are usually slower. Your Secretary of State’s website lists current estimates.
Do I need a lawyer to start an LLC?
No, not for a straightforward single-member LLC — the filing is a short form you can complete yourself. A lawyer is worth it for a multi-member LLC or any situation where the operating agreement needs to cover real disagreements.
Can I start an LLC by myself?
Yes. A single-member LLC is common — one person can be the owner, the registered agent, and the manager — and the steps are the same.
Does an LLC protect my personal assets?
An LLC is designed to separate your personal assets from the business’s debts, but that protection is not automatic. Keep business and personal finances separate, follow your state’s rules, and avoid personal guarantees on business debts, which can still put your personal assets at risk.
Do I need a business licence after forming an LLC?
Usually, yes — forming the LLC creates the company, but it does not licence you to operate. Check with your city, county, and state for the licences your type of business needs, and get them before you start trading.
The short version
Starting an LLC in 2026 comes down to a short sequence: pick a state and a name, appoint a registered agent, file the articles of organization, get an EIN, write an operating agreement, sort out licences, and open a business bank account. None of the steps is hard on its own — the work is in doing them in order, and in keeping the business’s money and records separate from your own.
Our roundup of the best free AI tools for small businesses is a useful next read once the company is formed — several of the tools there can handle the early admin, invoicing, and marketing.