To open an LLC, you file a formation document (usually called the articles of organization) with your state’s business filing office, pay a one-time fee somewhere between about $40 and $500, and then handle a short list of follow-ups: a registered agent, an operating agreement, a federal tax ID, a business bank account, and any licenses your work requires. The filing itself is simple. The details around it are where new owners trip, because mistakes at formation can quietly weaken the liability protection you set the LLC up to get.
Pick a Name Your State Will Accept
Your LLC’s name has to be distinguishable from every other business already registered in your state’s database. Search the secretary of state’s online business registry (free in every state) before you get attached to anything. A near-miss usually won’t clear: most states reject names that differ only by a word like “The” or a minor spelling change.
The name also has to include a designator telling the public they’re dealing with a limited liability company. “LLC,” “L.L.C.,” and “Limited Liability Company” all work in every state.1U.S. Small Business Administration. Choose Your Business Name If you want to operate publicly under a different name, you file a separate “doing business as” (DBA) registration.
Appoint a Registered Agent
Every LLC needs a registered agent: a person or company designated to accept lawsuit papers and government mail on behalf of the business. The agent has to have a physical street address in the state of formation and be available during normal business hours. A P.O. box alone doesn’t satisfy the requirement, because someone has to be physically present to accept service of process.
You can be your own registered agent. The tradeoff is that your address becomes public record and you have to actually be there during business hours. Commercial registered agent services run roughly $50 to $300 a year, keep your address off the filing, forward documents to you, and track compliance deadlines.
Decide How the LLC Will Be Managed
The formation form will ask whether your LLC is member-managed or manager-managed, so decide before you file. In a member-managed LLC, every owner has day-to-day authority and can sign contracts for the company. In a manager-managed LLC, one or more designated managers hold that authority while the other owners stay passive, closer to investors in a corporation.
Most small LLCs with a handful of active owners go member-managed because it’s simpler. Manager-managed makes sense when some owners are purely financial, or when you’re bringing in an outside professional to run operations. The choice controls who has legal authority to bind the company.
File the Articles of Organization
This is the filing that actually creates the LLC. Most states call it the articles of organization; a few use “certificate of formation” or “certificate of organization.” Whatever the label, the form asks for the same things: the LLC’s name, the registered agent’s name and street address, the organizers or initial members, the principal office address, and the management structure.
Fees run from about $40 at the low end to $500 at the high end, with most states somewhere between $50 and $150. Nearly every state takes online filings through the secretary of state’s website, and online filings typically come back approved within a few business days. Mail filings can take weeks. Once approved, you get a stamped copy or a certificate of existence confirming the LLC is a real legal entity.
Draft an Operating Agreement
The operating agreement is the LLC’s internal rulebook. It sets each member’s ownership percentage, how profits and losses are split, who decides what, how a member exits, and how disputes get handled. Most states don’t require you to file it anywhere; it works as a binding contract among the members.2U.S. Small Business Administration. Basic Information About Operating Agreements
Skipping this is one of the most common mistakes new owners make. Without an agreement, your state’s default LLC statute fills in the gaps, and the defaults rarely match what the owners actually intended. Most state defaults, for instance, split profits equally regardless of who put in what. A written agreement also helps protect your liability shield by showing that you treat the LLC as a separate entity rather than a sleeve for your personal finances.
Get an EIN From the IRS
An Employer Identification Number is a nine-digit federal tax ID, essentially a Social Security number for the business. You’ll need one to open a business bank account, hire employees, and file federal returns. The IRS issues EINs for free. The fastest route is the online application at IRS.gov, which takes about 10 minutes and gives you the number immediately.3Internal Revenue Service. Get an Employer Identification Number
You’ll need the Social Security number or individual taxpayer ID of the “responsible party,” meaning the person who controls or manages the LLC. The online tool runs Monday through Friday 6:00 a.m. to 1:00 a.m. Eastern, Saturday 6:00 a.m. to 9:00 p.m., and Sunday 6:00 p.m. to midnight. Fax and mail applications also work; they just take longer.3Internal Revenue Service. Get an Employer Identification Number4Office of the Law Revision Counsel. 26 USC 6109 – Identifying Numbers5eCFR. 26 CFR 301.6109-1 – Identifying Numbers
Choose How the LLC Will Be Taxed
The IRS doesn’t actually have an “LLC” tax category. It assigns a default based on how many members you have, and lets you elect something different if that saves money.
By default, a single-member LLC is a “disregarded entity”: the IRS looks past it and you report income and expenses on your personal return (Schedule C). A multi-member LLC defaults to a partnership, filing an informational Form 1065 while each member reports their share on a Schedule K-1. Either way, profits flow through to the owners’ personal returns and are subject to self-employment tax.6Internal Revenue Service. LLC Filing as a Corporation or Partnership
If a different classification helps, you have two main options. Filing Form 8832 elects C corporation treatment, which means the business pays its own income tax and you pay again on distributions.7Internal Revenue Service. About Form 8832 – Entity Classification Election More often, LLC owners file Form 2553 to elect S corporation status, which can lower self-employment tax once the business earns enough to support a reasonable salary. The S-corp deadline is two months and 15 days after the start of the tax year you want it to take effect; for a calendar-year business wanting S-corp status in 2026, that’s March 16, 2026. A newly formed LLC can also file within two months and 15 days of its formation date. The math depends on your income and expenses, so this is worth running past a tax professional.
Line Up Licenses, Permits, and Local Approvals
Forming the LLC doesn’t give you permission to operate. Depending on where you are and what you do, you may need a general business license from the city or county, plus specialized permits for the work itself. Restaurants need health department permits. Contractors need trade licenses. Businesses selling taxable goods need a state sales tax permit.
Zoning matters too. If you’re working from home, check whether local ordinances allow commercial activity in residential zones; some cities require a home occupation permit. Operating without the right licenses can bring fines or a shutdown order. The city or county clerk’s office is usually where to start.
A handful of states also require newly formed LLCs to publish a notice of formation in local newspapers. Costs run from under $100 in rural areas to over $1,000 in major metro counties, and the publication clock often starts on your formation date, so check this early.
If You’ll Do Business in More Than One State
If your LLC operates in states beyond the one it was formed in, those other states generally require you to register as a “foreign LLC” and get a certificate of authority. The usual triggers are a physical location, employees, or repeated business transactions in that state. Occasional sales to out-of-state customers usually don’t trigger it; an office or warehouse almost always does.
Operating in another state without registering has real consequences. The biggest is losing access to that state’s courts to enforce your own contracts. States can also assess back taxes, penalties, and interest from the date you started doing business there. Fees and paperwork vary, so check each state’s secretary of state before expanding.
Keep the LLC in Good Standing
Formation is the start, not the finish. Most states require LLCs to file periodic reports (annual or biennial) confirming the business’s contact information, registered agent, and management are still current. Report fees range from nothing in a few states to several hundred dollars a year. Miss a deadline and the state can administratively dissolve the LLC.
Administrative dissolution isn’t a paperwork technicality. A dissolved LLC can’t do business, anyone who continues operating on its behalf risks personal liability for debts from the dissolution period, and you lose exclusive rights to the name. Most states allow reinstatement if you file the overdue reports and pay a penalty, but the gap in protection is dangerous while it lasts.
Protect the Liability Shield You Just Paid For
The reason to form an LLC in the first place is the wall it puts between your personal assets and business debts. That wall isn’t automatic or permanent. Courts can “pierce the veil” and hold you personally responsible if you treat the LLC as an extension of yourself.
The fastest way to lose protection is mixing personal and business money. Writing a business check for your mortgage, depositing business income into a personal account, running personal expenses through the company — any of it puts the shield at risk. Open a dedicated business bank account as soon as your EIN comes in, and use it only for business.
Beyond keeping money separate, keep the basics current: update the operating agreement when things change, document significant decisions in writing, sign contracts in your capacity as a member or manager rather than in your own name, and stay on top of annual filings and your registered agent designation. None of it is hard on its own. Letting it slide over time is how the protection erodes.