How to Form an LLC

Every state runs its own LLC register with its own forms, fees and processing times. The sequence below is common to all of them. Work through it in order and you will not have to redo anything.

Step by step

1. Pick the state

   For most small businesses this is the state where you actually operate. Forming elsewhere usually means registering as a foreign entity at home anyway — two sets of fees, two registered agents, two annual filings, and no tax saving. See choosing a business structure.

2. Choose and check the name

   It must be distinguishable from existing entities in that state and include a designator such as "LLC" or "Limited Liability Company". Search the Secretary of State register, then search the federal trademark database separately — the state will not check trademarks for you. Check the domain and social handles while you are at it.

3. Appoint a registered agent

   A person or company with a physical street address in the state, available during business hours, to receive legal service and state correspondence. You can be your own, but the address becomes public record and you must reliably be there — which is why home-based owners often use a service.

4. File the articles of organization

   Sometimes called a certificate of formation or organization. Usually short: name, address, registered agent, sometimes the members and a management structure. Most states accept online filing. This is the step that actually creates the entity.

5. Write an operating agreement

   Not filed with the state, and required by only a few, but it is the document that governs how the LLC runs. Single-member LLCs need one too — see operating agreements.

6. Get an EIN

   Free from the IRS, usually issued immediately. Do this after formation so the name on the EIN matches the entity exactly. See getting an EIN.

7. Open a business bank account

   The practical step that makes the liability separation real. See opening a business bank account.

8. Handle licences and registrations

   Forming the entity is not permission to trade. Local and state licensing is separate, as are sales tax and employer registrations.

What it costs

Two numbers matter, and they are not the same:

• The one-off filing fee to form, which varies substantially between states.
• The recurring cost — annual or biennial report fees, and in some states a franchise tax or annual fee charged whether or not you make a profit. Some states with modest formation fees have significant annual ones.

Check both on your Secretary of State's site before choosing, because the recurring cost is what you live with.

Doing it yourself versus using a service

Neither is wrong. What is worth avoiding is paying for something the government provides free — an EIN being the clearest example.

After formation

Formation is the beginning of an ongoing obligation, not a one-off. Most states require a periodic report, and letting it lapse can put the entity out of good standing or lead to administrative dissolution — which removes the protection you formed it for. Put the dates somewhere durable: the annual compliance checklist covers what recurs.

Questions owners ask