As with any new business, creating a Limited Liability Company (LLC) takes some organization and intention, but the official process is pretty straightforward. You’ll need to decide on a business name, appoint a registered agent, file articles of organization, create an operating agreement, get a tax ID number, and register for state tax accounts.
Keep reading for a step-by-step guide to forming an LLC, plus advice about what to do after your LLC is approved.
How to start an LLC: Follow these 4 steps
When you create an LLC, you have to go through your Secretary of State. Every state has a different online portal for business owners, and different filing fees and LLC formation instructions.
That’s why it’s crucial to research your state’s particular LLC rules and regulations first. Visit your state’s Secretary of State website to learn how to get started and what to keep in mind throughout the business formation process. From there, take these steps:
1. Choose a business name and check your name availability
No two LLCs registered in the same state can have the same name. When you name your LLC, you need to pick a name that’s easy to identify on state records, that stands out from your competitors, and that—ideally—has an available website domain name. Once you have a shortlist of options, search your state’s business directory to see if any other registered LLCs have the same name or one that’s too similar. If they don’t, you’re good to go.
If your favorite choices are all taken, you’ll need to get creative. You can always pick a distinct legal name, then name your business (and all your merch and marketing materials) something else entirely. That’s called a DBA, which stands for Doing Business As.
2. Appoint a registered agent
A registered agent is the person or company designated to receive legal documents and notices on the LLC’s behalf. You can search for a registered agent service to do this, but the truth is you don’t need a special third party. You or one of your business partners can easily fill the role as long as you have a physical street address in the state where you’re forming the LLC (not a P.O. box) and you’re available at that address during normal business hours.
3. File articles of organization with your state
The articles of organization, sometimes called a certificate of formation, is a legal document you have to file to officially register your LLC. You don’t need a lawyer to help you draft and file the document—it’s easy to do yourself. Most states ask for basic business information in your articles of organization, including:
Business name
Principal operating address
Name and address of the registered agent
Business purpose (an overview of the LLC’s activities)
Management structure (whether or not the LLC is manager-managed or managed by members)
Duration of the LLC (which is usually indefinite or perpetual)
A signature from the organizer (the person filing the document) or another authorized person
Filing articles of organization usually requires you to create a business account on your state’s Secretary of State website, upload your articles of organization document or input the information line by line, then pay a filing fee (more on that later).
Some states also have additional state fees and follow-up requirements. For example, in California you have to submit a Statement of Information listing your LLC’s addresses, managers or members, and registered agent 90 days after you form your LLC, then every two years after that. California also charges an $800 minimum annual franchise tax.
4. Draft an operating agreement
Next, get to work writing your operating agreement, a document that clarifies your business’s ownership, management, and profit-sharing structures. If you have a single-member LLC, where you’re the sole business owner, your operating agreement will be super straightforward.
But if you have a multi-member LLC, you need to sit down with your fellow business owners and discuss the reality of running an operation together: how to divvy up profits, who’s contributing what, and what happens if someone wants to back out of business.
Your operating agreement should include:
The business name, address, and business purpose
The names and contact information of the LLC members
The ownership percentage split
How much capital each member contributed
The LLC’s management structure (member-managed, where all members run the business, or manager-managed, where one or more managers run it; managers can be members or outside hires)
How profits and losses will be split
Rules for dissolving the LLC or buying out fellow members
As well, check your state’s rules on operating agreements. Some states require it; others don’t.
Pro tip: For even more LLC info, check out Gusto’s LLC Hub, which has state-by-state guides to forming an LLC.
How much does it cost to form an LLC, and how long does it take?
Forming an LLC isn’t free. Each state charges its own filing fee, which for most states falls between about $35 and $500, though a few states charge more depending on factors like the number of members. Many states also have separate filing fees for foreign LLCs (operations initially registered in other states) versus domestic ones.
As for the timeline, most states take between three and 10 days to process an LLC request. If you file LLC documents online versus mailing forms in, the timeline is usually faster. And some states even offer same-day LLC review and approval for an extra fee.
Check out Gusto’s LLC Hub for more information, including state guides.
What to do after your LLC is approved
Once your Secretary of State confirms that your LLC is officially registered for business, it’s time to get your finances squared away. Check these items off of your to-do list:
1. Get an EIN
Most LLCs need a federal Employer Identification Number (EIN), a nine-digit number the IRS assigns to your business. You’re required to have one if your LLC has employees, has more than one member, or elects to be taxed as a corporation. A single-member LLC with no employees can technically use the owner’s Social Security number for federal taxes, but having an EIN keeps your SSN off documents like vendor W-9s. You’ll use your EIN to file taxes, open a business bank account, hire employees, and provide it to vendors and clients who need it for tax reporting.
Getting an EIN just takes a couple of minutes. Visit the Internal Revenue Service’s (IRS) EIN application page, then input your personal and business details: your name, Social Security number, business name, business address, and business entity type.
Your EIN appears on screen as soon as you finish the application, so be sure to download and save the confirmation letter.
2. Register for state tax and labor accounts
Your state might require you to register for state tax accounts—and employer payroll accounts if you plan to hire employees. A few states automatically create a tax account for you when you file your LLC with the Secretary of State, while others ask you to visit their economic development or department of revenue websites to set up an account.
Depending on your state and whether or not you hire people, you might have to pay or carry:
Annual franchise taxes
State sales taxes
State income taxes
State disability insurance (only in a handful of states, such as California, Hawaii, New Jersey, New York, and Rhode Island)
Workers’ compensation insurance
Find out what’s required for your state here.
3. Open a business bank account
Now that your business finances are separate from your personal finances, you need a business bank account to pay taxes from, track expenses, and run payroll. You can open a separate account at your personal bank of choice, or branch out to a different bank, a local credit union, or a small business payroll software.
4. Register your DBA
If you chose a different name for your business than your official LLC name, you’ll need to register your DBA with your state, county, or city (depending on where you operate). Check with your state or local business office to see what that requires. It’s usually nothing more than filling out some basic paperwork, providing your EIN, and paying a small local filing fee.
Deciding between an LLC and a different business entity
Every business structure has different advantages and tax benefits. An LLC comes with pass-through taxation and personal liability protection if you can’t pay back your business debts. LLCs are also easier and cheaper to form than corporations.
Sole proprietorships require no filing and no extra work to start, but they also have no liability protection for small business owners, so your personal assets (like your home or car) will be on the hook if creditors come around.
C corporations, on the other hand, tax both the business and the business owners separately, but they also have stronger liability protection, more fundraising potential, no shareholder cap (unlike S corps), and more options for setting up employee equity programs.
S corporations, meanwhile, have the same liability protection as C corps but get to take advantage of pass-through taxation.
General partnerships are similar to LLCs in that they get default pass-through taxation. But they don’t provide the limited liability protection LLCs do, and they don’t require any official filing to set up. Limited partnerships (LPs) also get pass-through taxation, but they must file with the state, and while limited partners have liability protection, at least one general partner remains personally liable for the business’s debts.
Need help—or even just validation on your choice? Read our guide for help on picking the right business entity.
Frequently Asked Questions
Can I form an LLC myself without a lawyer?
You can absolutely form an LLC on your own without a lawyer. All you need is a distinct business name, a registered agent with a physical address in your state, and the money to file your articles of organization.
Do I need an LLC before I start making money?
You don’t need to form an LLC before you start making money. Many business owners earn revenue as a sole proprietor for months or years before deciding to turn their operation into an LLC. If that’s the case, you’ll just have to file your state’s LLC paperwork, pay the corresponding fees, and transfer over your business assets, contracts, and accounts.
Can a single person own an LLC?
Yes, it’s called a single-member LLC. Single-member LLCs protect your personal assets in case your business goes under, but they still function as pass-through entities for tax purposes. In other words, your business profits and losses go through your personal tax return.
