What is an LLC?
A Limited Liability Company (LLC) is a business structure that protects your personal assets in case your company gets sued. Your personal assets include belongings like your home, car, and personal bank accounts.
LLCs are formed at the state level, so the rules and costs vary by state.
That said, starting an LLC costs between $30 and $350. And in most states you can get an LLC online immediately, or within 2 weeks.
How to Start an LLC, Step-by-step
Here are the 5 steps to forming an LLC:
- Choose an LLC Name
- Select a Registered Agent
- File Articles of Organization
- Create an Operating Agreement
- Get an EIN
If you want to form your LLC yourself, select the free guide to your state using the drop down below.
Or, if you want someone to take care of it for you, we recommend hiring Northwest Registered Agent.
(We recommend Northwest. We've reviewed all the top companies in the industry. And Northwest is our #1 pick for prices, customer support, and address privacy. Check out Northwest vs LegalZoom to learn more.)
How much does it cost to start an LLC?
How much it costs to start an LLC depends on the state your LLC is formed in.
This means it costs between $30 and $350 to file the Articles of Organization (the document that creates an LLC). As of 2023, the average cost to form an LLC in the US is $132.
After your LLC is formed, you’ll also have ongoing fees to pay like an Annual Report, taxes, and any business licenses or permits your LLC needs to operate.
As of 2023, the average LLC Annual Report fee in the US is $91, but this fee can range from $0 to upwards of $200 in some states. The other ongoing fee amounts vary widely by state, industry, business activity, and business income.
You can check the LLC costs for your state in LLC Costs by State.
How long does it take to form an LLC?
How long it takes to form an LLC depends on:
- the state where you form the LLC
- whether you file the paperwork online or by mail, and
- whether you pay extra for expedited service
If you form your LLC online, most states process your LLC immediately, or within 2 weeks.
And if you form your LLC by mail, most states take anywhere from a few business days to several weeks.
That said, you can pay extra to get your LLC formation expedited in nearly every state.
And you can check How long does it take to get an LLC for processing delays in all 50 states.
Here are the steps to starting an LLC in all 50 states
1. Search your LLC Name
The first step to starting your LLC is making sure your LLC name is available in your state.
You need to do this because two businesses in the same state can’t have the same name.
First, search your business name and compare it to existing businesses in your state.
You can make sure the LLC Name you want is unique from existing businesses using your state’s Business Records Search. (We provide links to your state’s Business Records Search, and instructions to use it in our step-by-step state guides linked in the drop-down above.)
Second, familiarize yourself with the naming rules in your state (so your LLC gets approved).
We explain both in more detail here: Guide for LLC Naming.
2. Choose a Registered Agent
The next step is to choose a Registered Agent.
An LLC Registered Agent is a person or company who accepts legal documents and state notices on behalf of your Limited Liability Company.
Note: In some states, Registered Agents are also called “Resident Agent” or “Statutory Agent.
These terms all mean the same thing.
Who can be an LLC Registered Agent?
In most states, you have 3 options for who can be the Registered Agent for your LLC:
- A friend or family member
- A Registered Agent Service
The Registered Agent for your LLC must have a physical street address in the state where your LLC is located. PO Boxes aren’t allowed, except in Ohio.
And it’s important to know that the Registered Agent’s name and address will be listed on public records.
If you don’t have an address in your LLC’s state, or you want more privacy, you can hire a Registered Agent Service for your LLC.
We recommend Northwest Registered Agent
Our favorite feature about Northwest’s Registered Agent Service is they’ll let you use their office address throughout your LLC filing. This way, you can keep your address off public records.
They’ll also scan any mail sent to your LLC and upload it to your online account.
Northwest has excellent customer service, and they’re who we trust to be our own Registered Agent.
3. File LLC Articles of Organization
To start an LLC, you need to file LLC Formation paperwork with the state called the LLC Articles of Organization.
Note: In some states, the Articles of Organization is called a Certificate of Organization or a Certificate of Formation.
These terms all refer to the same thing: the LLC paperwork you file to form a Limited Liability Company.
Your LLC formation documents are filed with the Secretary of State (or similar government office, depending on your state).
What information is required for the LLC Articles of Organization?
The information required for your LLC Articles of Organization varies a bit by state.
That said, most LLC formation documents require:
- Your LLC’s name
- Your LLC’s business purpose
- Your LLC’s main business address
- Your Registered Agent’s name and physical address
- Whether the LLC will be a Member-managed vs Manager-managed LLC
- How long you’d like your LLC to exist
- The signature from one or more LLC Organizer(s)
How long does it take to start an LLC?
How long it takes to start an LLC depends on where you form your LLC.
Some states process LLC Articles of Organization immediately if you file online. Other states take anywhere from a few days, to a few weeks.
And if you file by mail, you’ll need to add on mail turnaround times, too.
That said, many states allow you to speed up your LLC filing by paying an extra fee.
How much does it cost to file the LLC Articles of Organization?
There is a one-time fee to create your LLC, called the LLC filing fee.
And how much it costs varies by state. The cost is usually between $50 and $150, but some states charge more than $200.
If you want to file your Articles of Organization yourself, or read about your state’s specific filing fee, you can use our free, step-by-step LLC Formation Guides for every state (linked above).
Or, you can hire a company to do it for you.
4. Create an LLC Operating Agreement
You can think of your LLC’s Operating Agreement as a “companion” document to the Articles of Organization.
The Articles of Organization creates your LLC, and the Operating Agreement shows who owns the LLC.
It also keeps a record of important information like your business entity structure, profit shares, business roles, and the business rules the LLC Members have agreed on.
Why do I need an Operating Agreement for my LLC?
Having a record of the LLC’s rules helps the LLC Members to resolve any business disagreements.
Also, some banks require an Operating Agreement when you open an LLC bank account.
And having an LLC Operating Agreement will be very helpful if you ever end up in court. Reason being, it helps prove that your LLC is being run properly.
That’s why we recommend that all LLCs have an Operating Agreement – including Single-Member LLCs.
Furthermore, an Operating Agreement for a Limited Liability Company is an “internal document“. Meaning, you don’t need to file it with any state agency or the IRS (Internal Revenue Service). Just keep a copy with your business records.
You can download a free template below.
Then, learn how to fill it out by watching our step-by-step LLC Operating Agreement video.
5. Get an EIN for your LLC
The next step is to get an EIN Number for an LLC from the IRS.
Note: An EIN Number is also called a Federal Tax ID Number or Federal Employer Identification Number.
An EIN Number is used to:
- identify your LLC for tax purposes
- open a business bank account
- apply for business licenses and permits
How much does an EIN cost?
Getting an EIN Number from the IRS is completely free.
How long does it take to get an EIN?
If you apply online, it takes 15 minutes to get an EIN from the IRS website.
If you apply by mail or fax, it can take 1-3 months.
How can I get an EIN?
US Citizens/US Residents: If you have an SSN or ITIN, you can apply for an EIN online. Follow these instructions: Apply for an EIN online.
Non-US Residents: You can’t get an EIN online, but you can still get one by fax or by mail. Follow these instructions: How to get an EIN without an SSN or ITIN.
What do I do after my LLC is approved?
After your LLC is approved, there are some additional steps.
Open an LLC business bank account
You’ll want to open a business bank account for your LLC.
This makes accounting and record-keeping much easier for your business income and business debts.
Having a separate business bank account also maintains your personal liability protection. And it does this by keeping your business assets and income separate from your personal assets and income.
Get business licenses and permits
Good news, most states don’t require a state general business license for a Limited Liability Company.
Local and Industry-specific Requirements
However, depending on where your LLC is located, you may need a local business license or permit for your business entity.
For example, if you want to start a daycare, you may need a business license from the city or county.
If your LLC will collect sales tax on taxable goods or services, you will likely also need a Seller’s Permit. It’s simply a permit that authorizes you to collect sales tax and pay it to the state.
And businesses in some industries are required to get federal, state, or local licenses that are specific to that industry (like a liquor license or commercial fishing license).
You can learn more in our state-by-state guides, linked above on this page.
File your LLC Annual Report
Most LLCs are required to file an Annual Report every year.
The Annual Report keeps your LLC in good standing with the state.
Note: In some states, the Annual Report is called the Annual Renewal or the Annual Fee. These mean the same thing.
That said, some states require you to file your LLC’s report every 2 years instead (called a Biennial Report). Biennial Reports work the same way that Annual Reports do. They’re just filed every other year instead of every year.
How much does an LLC Annual Report cost?
Most Annual Reports cost between $30 and $200 per year.
Having said that, a few states charge $300 or more per year.
When is the Annual Report due?
The Annual Report due date varies by state, but there are 3 main methods the states use to decide when Annual Reports are due:
Many states use your LLC’s effective date for your Annual Report due date. (You can think of the effective date as being your LLC’s birthday).
Some states use a quarterly system to determine the due date for your report.
And others use the same date for every LLC in the state.
When is my first Annual Report due?
Your first Annual Report is usually due the year after your LLC was approved.
For example, if your LLC was approved on February 15, 2023, your first Annual Report is due in 2024.
How do I file my LLC Annual Report?
You can file your LLC’s Annual Report online or by mail in most states. We recommend the online filing because it’s easier to complete.
You can check our table of LLC Annual Fees by State for your state’s LLC Annual Report information. It includes your state’s fee amount, due date, the name of the form, and the name of the state agency you’ll need to file it with.
File and pay taxes
LLCs don’t pay taxes to federal and state governments.
Instead, the LLC Members pay the taxes for the LLC as a part of their personal tax return.
How will my LLC be taxed?
By default, a Limited Liability Company is taxed by the IRS based on the number of owners your LLC has:
- A Single-Member LLC is taxed like a Sole Proprietorship.
- A Multi-Member LLC is taxed like a Partnership.
Alternatively, you can ask the IRS to tax your LLC like a C-Corporation or S-Corporation.
Married Couples: Instead of having your LLC taxed as a Partnership, married couples can elect to be taxed as a Single-Member LLC (aka Qualified Joint Venture LLC). This is only allowed in community property states.
Besides federal taxes, there are also state and local income taxes – and sales tax.
Learn more about LLC taxes in How are LLCs taxed.
How to Start an LLC FAQs
What are the benefits of an LLC business entity?
The first benefit of an LLC is protecting your personal assets. Meaning, if your business is sued, your personal assets – like your home, cars, and bank accounts – are protected.
This personal liability protection applies to all LLC owners (called LLC Members). It doesn’t matter if your LLC has one Member, or several Members. All of the LLC owners are protected from the business debts and liabilities.
This liability protection wouldn’t apply if you operate as a Sole Proprietorship or Partnership. With these types of informal business structures, the business owners aren’t protected in the event of a lawsuit.
For that reason, LLCs are a much more popular business entity structure.
Another benefit is LLC pass-through taxation. This means the LLC itself doesn’t pay income tax. Instead, the profits “pass through” to the LLC Members. And for federal tax purposes, the LLC Members pay the taxes on the LLC profits using their personal tax returns.
State income taxes are very similar, since the state honors the federal tax treatment of your LLC.
In this way, LLCs can save you money by avoiding the double-taxation that comes with Corporations.
Do LLCs pay taxes?
No, LLCs themselves don’t pay taxes to state and federal governments.
Instead, the LLC Members pay the taxes on the LLC’s profits on their personal tax returns.
We explain this in-depth in our LLC tax lessons, linked above.
Where should I form my LLC?
Choosing a state to start an LLC depends on where you live – and where you’re doing business.
Meaning, you should start your LLC in the state where you live or do business. While many websites talk about tax rates and advantages of certain states, none of that applies if it’s not the state where you live and do business.
For example, if you form an LLC in Delaware, but live in and conduct business in Maryland, you’ll also need to register your Delaware LLC in Maryland as a Foreign LLC (and pay extra fees). And you’ll end up paying Maryland taxes anyway. This ends up leading to more costs and more headaches with no advantages.
In summary, if you live in and conduct business in Delaware, then yes, Delaware is a good state to start a business. If you don’t live in and do business in Delaware, then no, Delaware isn’t a good state to start a business.
Real estate exception: If you’re purchasing real estate outside of the state where you live and do business, you should form your LLC in the state where the property is located.
For more information, please see Best State to Form an LLC.
Can you file an LLC yourself?
Yes, you can file an LLC yourself. And we make it super easy using our free step-by-step LLC guides.
It’s important to understand the state-specific requirements for your LLC.
So our guides cover everything from state-specific naming requirements, to filing your LLC and keeping up with ongoing requirements (like your Annual Report).
You can access them using the drop down on the page above.
Can I start an LLC online?
Yes, you can file your LLC online in nearly every state. (There are a couple of states where you can only file by mail. However, they should have an online filing system in the next 1-2 years.)
How much it costs to get an LLC and how long it takes the state to approve your LLC both vary by state.
That said, the average Articles of Organization filing fee is $132.
What’s the difference between an LLC and a Corporation?
While they are both business structures (also called legal entities), there are a few differences between an LLC and a Corporation,
These differences include what the business structure is used for, how ownership works, and how the business is required to run.
What is an LLC?
An LLC is a business structure used to run a business or hold assets (like a boat, real estate, or aircraft).
And they are specifically designed to protect your personal assets from any business debts or liabilities.
The owners of an LLC are called “members”. An LLC can be owned by only one member (called a “Single-Member LLC”), or it can be owned by two or more members (called a “Multi-Member LLC”).
What is a Corporation?
On the other hand, a Corporation is a business structure that is most often used to run a large company with shareholders and investors. (Corporations aren’t the best choice for real estate.)
The owners of a Corporation are called “shareholders”.
And after you form a Corporation, you’re required to elect a Board of Directors to oversee the company in general. And then you must elect Corporate Officers who will actively run the business.
Is an LLC better than a Corporation?
Whether an LLC is a better choice than a Corporation depends on how you want to run your business.
Corporations are best-suited for large companies that need to raise large amounts of money.
However, they come with stricter requirements, like holding annual meetings, recording meeting notes, and issuing shares to stockholders.
Corporations can be complex and expensive to maintain.
Corporations are also generally subject to “double taxation”. Meaning, the business profits are taxed twice – once at the business level and again at the personal level.
On the other hand, LLCs are the ideal choice for running a business and holding assets.
LLCs aren’t required to issue shares to stockholders – because they don’t have any.
LLCs are easy to understand and much less expensive to maintain.
And, LLCs have “pass-through taxation”. Meaning, the business profits flow through the LLC and are only taxed at the personal level. So your business profits only get taxed once.
For more information, see LLC vs Sole Proprietorship vs Corporation.
Can an LLC be an S-Corp?
Technically, an LLC can’t be an S-Corp. That said, your LLC can choose to be taxed like an S-Corp.
This is because an S-Corp isn’t a business structure like an LLC or C-Corporation.
Instead, an S-Corporation is a tax election.
Meaning, your LLC can’t be an S-Corp, but it can choose the S-Corporation tax election for paying state and federal income taxes.
In other words, you can tell the government to have your LLC taxed as an S-Corp.
And you make the S-Corporation tax election by filing Form 2553 with the Internal Revenue Service (IRS).
That said, we don’t recommend choosing the S-Corporation tax election until your business is making at least $75,000 per year, or unless it saves you a lot on self-employment taxes.
Having said that, different tax professionals have different opinions on when (if ever) it makes sense to have your LLC taxed as an S-Corp.
Please speak with an accountant before filing any forms with the IRS. If you need help finding one, we’ve made a list of Accountant Recommendations in all 50 states.
Can a Sole Proprietor be an LLC?
Yes, a business run as a Sole Proprietorship can be converted into an LLC.
This is done by filing Articles of Organization with your state’s Secretary of State’s office.
How does forming a Limited Liability Company affect my tax classification?
How your LLC affects your tax classification depends on the number of LLC Members.
If your Sole Proprietorship is turned into a Single-Member LLC, your LLC will automatically be taxed as a Sole Proprietorship.
If your Sole Proprietorship is turned into a Multi-Member LLC, your LLC will automatically be taxed as a Partnership.
This is called being taxed in your default status. Meaning, the IRS treats all LLCs this way for tax purposes, unless the LLC Members request otherwise.
The IRS uses this method because LLCs are solely a business entity structure, not a tax classification.
Said another way, since LLCs don’t have their own tax classification, the government automatically taxes all LLCs based on the number of Members in the LLC.