How to Form an LLC: Steps, Taxes, and BOI Reporting

To form a limited liability company, you file a document called the articles of organization with your state’s business registry and pay a one-time filing fee that runs roughly $35 to $500 depending on the state. That filing is the moment the LLC legally exists, but learning how to form an LLC properly means handling the steps that come after it: getting a federal tax ID, choosing how the business will be taxed, writing an operating agreement, and keeping up with annual reports so the state doesn’t dissolve the company. Every state runs formation through its own statutes, so the specifics shift from one state line to the next, but the core sequence below applies almost everywhere.

Pick a Name the State Will Accept

Your LLC name has to be distinguishable from every other registered entity in the state where you file. Every state maintains a searchable business name database, usually through the Secretary of State’s office, and running your proposed name through it before filing avoids a rejection that costs you time and sometimes a second fee. Most states also require a designator like “LLC,” “L.L.C.,” or “Limited Liability Company” in the name so the public can see what kind of entity it is.

If the name is right but you’re not ready to file, most states let you reserve it for 60 to 120 days for a small fee. Keep two limits in mind. Registering the name only protects it within that state’s business registry, so another business can still use it elsewhere. And a state registration is not a trademark. If the name is going to carry the brand, a federal trademark search through the U.S. Patent and Trademark Office is worth doing before you commit.

Appoint a Registered Agent

Every LLC has to designate a registered agent: a person or company authorized to accept legal documents on the business’s behalf, including lawsuit papers and official government mail. The agent needs a physical street address in the state of formation and has to be available during normal business hours. A P.O. box doesn’t qualify.

You can be your own registered agent if you have a qualifying address in the state. The tradeoff is that your home address goes on the public record and you have to be reachable at that address every weekday. Most owners pay a commercial registered agent service instead, typically $100 to $300 per year, which keeps a personal address off public filings and provides a reliable contact point that doesn’t depend on your schedule.

File the Articles of Organization

The articles of organization, called a certificate of formation in some states, is the document that officially creates the LLC. You file it with the state’s business registry, usually the Secretary of State’s office, and the form lives on the agency’s website.¹ Each state’s form looks a little different, but the core fields are almost universal:

The exact LLC name you want registered, with the required designator.
The name and physical in-state address of your registered agent.
The principal office address, which can sit in a different state.
The organizer: whoever is filing the paperwork, who doesn’t need to be a future owner.
Duration, meaning whether the LLC exists indefinitely or for a set number of years.¹
Management structure: member-managed or manager-managed.

Some states ask for a brief statement of business purpose, though most accept a general purpose like “any lawful business activity.” The organizer signs to attest the information is accurate, and in many states that signature carries legal consequences if any of it turns out to be false.

Fees range from $35 on the low end to roughly $500 at the high end, with most states falling between $50 and $200. Online filings move fastest, sometimes approved the same day or within a few business days, while mailed paper applications can take several weeks depending on the backlog. Many states offer expedited processing for an extra fee. Once approved, the state issues a stamped or certified copy of the articles, often with a certificate of organization that includes an LLC identification number you’ll use on future filings. If the state spots an error, it sends the filing back; some states charge a new processing fee for resubmission, so getting the details right the first time saves money.

Member-Managed or Manager-Managed

This choice matters more than people realize because it decides who has legal authority to sign contracts, open accounts, and bind the company. In a member-managed LLC, every owner shares in running daily operations. In a manager-managed LLC, one or more designated managers run things while the other members function more like passive investors. If the articles don’t specify, most states default to member-managed.

For a two-person LLC where both owners work in the business, member-managed is the natural fit. Manager-managed makes more sense when outside investors contributed capital but don’t want an operational role, or when enough members are involved that decision-making by committee becomes impractical.

Should You Form in Delaware or Wyoming

You’ll hear that forming in Delaware or Wyoming offers tax advantages or stronger legal protections. That holds for certain large corporations and investment vehicles. For a typical small business LLC, forming in your home state is almost always the better move. If you form in Delaware but operate in Texas, you still have to register as a foreign LLC in Texas, pay fees in both states, and keep a registered agent in both. The extra cost and paperwork rarely pay back for a small operation.

Write an Operating Agreement

An operating agreement is the internal contract that governs how the LLC runs. It sets each member’s ownership percentage, how profits and losses get divided, voting procedures, and what happens when someone leaves or a new member joins.² Profit-sharing doesn’t have to mirror ownership percentages. If one member contributes more labor and another contributes more capital, distributions can reflect that as long as the agreement spells it out.

Most states don’t require you to file the operating agreement with any government agency, and a handful don’t technically require you to have one at all.² Skip it anyway at your own risk. Without one, your LLC runs on your state’s default rules, which are generic and often won’t match what you and your co-owners actually agreed to. The absence of an operating agreement is also one of the factors courts look at when deciding whether to pierce the veil and hold owners personally liable for business debts. If the business looks indistinguishable from the owner’s personal affairs, a court may treat the LLC as a shell.

Even single-member LLCs benefit from one. It creates a paper trail showing the business operates as a genuinely separate entity, which is exactly what you want if liability protection is ever challenged. Banks and lenders usually ask for a copy before opening a business account or extending credit, since it shows who can act on the company’s behalf.

Get an EIN from the IRS

After the state approves your LLC, the next step is getting an Employer Identification Number from the IRS. An EIN is a nine-digit tax ID for the business.³ You need one to open a business bank account, hire employees, or file federal tax returns for the LLC.

The IRS recommends forming your entity with the state before applying for an EIN to avoid processing delays.⁴ The fastest route is the online application, which issues the number immediately upon completion during business hours. You can also apply by fax or mail using Form SS-4, but those take days to weeks.³

Choose How the LLC Is Taxed

The IRS has no dedicated tax category for LLCs. It assigns a default classification based on how many members the LLC has and then lets you elect a different one if you prefer.

The Defaults

A single-member LLC is treated as a “disregarded entity,” meaning the IRS ignores it for income tax purposes and the owner reports business income and expenses directly on their personal return, usually on Schedule C.⁵ A multi-member LLC is classified as a partnership by default: the LLC files an informational return (Form 1065) and each member receives a Schedule K-1 showing their share of income.⁶

Under either default, active members owe self-employment tax of 15.3% on their share of net business earnings, covering Social Security (12.4%) and Medicare (2.9%).⁷ That 15.3% is on top of regular income tax, and it catches many new owners off guard when the first estimated tax payment is due.

Electing a Different Classification

If the default doesn’t suit you, there are two main alternatives. Filing Form 8832 lets the LLC elect taxation as a C corporation.⁶ Filing Form 2553 lets it elect S corporation status, which allows members who work in the business to pay themselves a reasonable salary (subject to employment taxes) and take remaining profits as distributions that aren’t subject to self-employment tax.⁸

The S-Corp election has a hard deadline. It has to be filed no more than two months and 15 days after the start of the tax year you want it to take effect, or at any time during the preceding tax year.⁸ Miss the window and you’re stuck with the default for that year. S corporations also come with restrictions, including a cap of 100 shareholders and only one class of stock, so they don’t fit every LLC.

If you’re fine with the default classification, you don’t file anything extra with the IRS beyond your normal tax returns.⁶

Keep the LLC in Good Standing

Formation isn’t the finish line. Most states require LLCs to file a periodic report, usually called an annual report or biennial report, confirming the company’s current name, address, registered agent, and members or managers. These reports are separate from tax returns, and the fees range from nothing in a few states to several hundred dollars in others. Some states also charge a flat annual franchise tax on LLCs regardless of income.

Miss the filing deadline and the state can administratively dissolve the LLC. Once that happens, the LLC loses its authority to conduct business, bring lawsuits, or maintain pending litigation. People acting on behalf of a dissolved LLC can be held personally liable for debts incurred during the period of dissolution. In many states the company can even lose its name if another entity registers it while the LLC is dissolved. Reinstatement is possible, but it means paying back fees, penalties, and sometimes filing all the missing reports at once.

Registering in Other States

If your LLC does business in states beyond where it was formed, you may need to register as a “foreign LLC” in each additional state. There’s no universal definition of what triggers this, but common factors include a physical office, warehouse, or storefront in the state, employees working there, or regularly soliciting sales. Having a bank account in another state or doing business through interstate commerce generally doesn’t count on its own.

The registration process in each state mirrors the initial formation: file an application for authority or similar document, appoint a registered agent in that state, and pay a filing fee. Skipping this carries real consequences. A state can deny your LLC the right to bring lawsuits in its courts, impose fines and back taxes for the period you operated unregistered, and in some cases hold individual officers personally liable.

Licenses, Permits, and Publication

Forming an LLC doesn’t by itself give you the right to operate in a regulated industry. Certain activities require federal licenses or permits regardless of entity type, including alcohol manufacturing and sales, firearms and explosives, aviation, commercial fishing, broadcasting, nuclear energy, mining on federal lands, and maritime transportation.⁹ Most businesses also need state and local licenses or permits that vary by industry and location.

A few states impose a publication requirement: you place a legal notice announcing your LLC’s formation in local newspapers for a set number of weeks, then file proof of publication with the state. It applies in only a handful of jurisdictions, and the costs vary with local newspaper advertising rates. Failing to complete publication where it’s required can suspend the LLC’s authority to conduct business.

Beneficial Ownership Reporting

The Corporate Transparency Act originally required most domestic LLCs to report their beneficial owners to the Financial Crimes Enforcement Network. As of March 2025, FinCEN issued an interim final rule exempting all entities created in the United States from this requirement. Only entities formed under foreign law that have registered to do business in a U.S. state currently need to file beneficial ownership reports.¹⁰ If you’re forming a domestic LLC, you do not need to file a BOI report under the current rules. This area has shifted multiple times since 2024, so check FinCEN’s site if you’re reading this after mid-2026.

1
Legal Information Institute. Articles of Organization
2
U.S. Small Business Administration. Basic Information About Operating Agreements
3
Internal Revenue Service. About Form SS-4, Application for Employer Identification Number
4
Internal Revenue Service. Get an Employer Identification Number
5
Internal Revenue Service. Single Member Limited Liability Companies
6
Internal Revenue Service. Limited Liability Company (LLC)
7
Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
8
Internal Revenue Service. Instructions for Form 2553
9
U.S. Small Business Administration. Apply for Licenses and Permits
10
Financial Crimes Enforcement Network. Beneficial Ownership Information Reporting