To turn your business into an LLC, you file formation paperwork with your state’s business registry, move your assets and contracts into the new entity’s name, and set up its tax and banking accounts so the company operates as something legally separate from you. State filing fees generally run between $50 and $500, and the full conversion usually takes a few days to several weeks depending on how fast your state processes documents. The steps below walk through the sequence in the order most owners encounter them.
Pick and Clear a Business Name
Your LLC’s name has to be distinguishable from every other entity already registered in your state. Most secretary of state websites have a free name search tool, and running your proposed name through it before filing anything saves you from a rejected application. The name must end with a designator such as “LLC,” “L.L.C.,” or “Limited Liability Company” so the public can see the structure at a glance.
If you want to operate under a shorter brand name or a trade name that differs from the official LLC name, you’ll likely need a separate fictitious name registration, sometimes called a DBA. That’s its own form and its own fee, and it simply ties the trade name to your legal entity on the public record.
Line Up a Registered Agent
Every LLC must designate a registered agent: a person or company authorized to receive lawsuits and government notices on the business’s behalf. The agent needs a physical street address in the state of formation (P.O. boxes generally don’t qualify) and has to be available at that address during normal business hours.
You can serve as your own registered agent if you have a qualifying in-state address. Professional registered agent services typically charge $90 to $250 per year and are common among owners who work from home, don’t want their address on the public record, or travel enough that they can’t guarantee someone is at the office to sign for mail.
File the Articles of Organization
Filing the Articles of Organization (called a Certificate of Formation in some states) is the step that actually creates your LLC. The form is usually downloadable or fillable on your secretary of state’s website, and it asks for:
- The exact LLC name, including the required designator
- The registered agent’s name and physical address
- The principal office address where the business keeps its records
- Whether the LLC will be member-managed, meaning all owners share in daily decisions, or manager-managed, where one or more designated people run operations
Get the details right, because they become public record. A wrong registered agent address, for example, can mean you never receive notice of a lawsuit and end up with a default judgment against the business.
Filing fees land somewhere between $50 and $500. Most states take online submissions by credit card and process them faster than paper. Standard turnaround runs from a few days to several weeks, and most states sell expedited processing as an add-on. Once the state approves the filing, it issues a Certificate of Formation stamped with the effective date, and that date is when your liability protection begins.
A few states also require newly formed LLCs to publish a notice of formation in a local newspaper. Where it applies, publication can cost anywhere from about $100 to well over $1,000 depending on the area, so check your state’s rules before filing.
Write an Operating Agreement
The operating agreement is the LLC’s internal rulebook. You don’t file it with the state; it lives in your business records. Several states legally require one, and even where it isn’t mandatory, a written agreement strengthens your liability protection because it shows the LLC is being run as a real entity with its own governance.
A workable operating agreement covers:
- Each member’s ownership percentage, usually tied to their capital contribution
- How profits and losses are allocated, which can differ from ownership percentages if members agree
- Initial capital contributions and what happens if the business needs more funding later, including whether additional contributions are mandatory and what happens to a member’s stake if they decline
- Voting rights and how decisions get made
- Buyout and exit provisions, including how a departing member’s interest is valued and what triggers a buyout (voluntary withdrawal, death, disability, bankruptcy)
- Dissolution procedures, including the order in which debts and member interests get paid when the company winds down
Single-member LLCs benefit from an operating agreement too. When courts examine whether to disregard an LLC’s liability shield, they sometimes look at whether the owner actually followed a written agreement. If you borrow a multi-member template, strip out the provisions that don’t fit a solo structure; a mismatch can work against you.
Move Your Assets and Contracts Into the LLC
Forming the LLC is only half the conversion. If you’ve been running a sole proprietorship, your business assets (equipment, vehicles, inventory, intellectual property) are currently owned by you personally. The LLC doesn’t own anything until you transfer those assets into its name.
For titled assets like vehicles, real estate, and equipment with certificates of title, that means filing a transfer with the appropriate agency and having a new title issued in the LLC’s name. Record the fair market value at the time of transfer, your original cost, and any depreciation already claimed. If an asset has a lien or mortgage, you’ll usually need the lender’s written permission before transferring it.
Contracts, leases, and vendor agreements are trickier. Most contracts can’t simply be reassigned without the other party’s consent. Review each one for an assignment clause and contact landlords, suppliers, and key clients to execute new agreements or formal assignments. If you skip this, you can remain personally liable on the old contract even after the LLC is operating.
Get an EIN and Open a Business Bank Account
Whether you need a new Employer Identification Number depends on your situation. A sole proprietor converting to a single-member LLC with no employees, no excise tax liability, and no election to be taxed as a corporation can keep using an existing EIN or Social Security number. A new EIN is required if the LLC will have employees, owe excise taxes, or be treated as a partnership or corporation for tax purposes. A sole proprietor who brings in partners and forms a multi-member LLC always needs a new EIN, because the IRS treats the entity as a partnership.1Internal Revenue Service. When to Get a New EIN
The fastest route is the IRS online application at IRS.gov/EIN, which issues the number immediately. Form SS-4 can also be filed by fax (typically processed within four business days) or by mail (four to five weeks).2Internal Revenue Service. Instructions for Form SS-4 With the EIN in hand, open a dedicated business bank account in the LLC’s name. Banks will generally want to see the Certificate of Formation and the EIN confirmation letter. Update any local occupational licenses or professional permits so they reflect the new entity.
Decide How the IRS Will Tax Your LLC
One of the biggest decisions a new LLC owner makes has nothing to do with state paperwork: it’s how the IRS taxes the business. By default, a single-member LLC is a “disregarded entity,” meaning the IRS ignores it for income tax and you report business income on Schedule C of your personal return, exactly as you did as a sole proprietor. A multi-member LLC is treated as a partnership by default, with each member reporting their share on their individual return.3Internal Revenue Service. Limited Liability Company (LLC)
Something many new LLC owners miss: converting from a sole proprietorship to a single-member LLC does not change your self-employment tax obligation. You still owe Social Security and Medicare taxes on net business earnings the same way you did as a sole proprietor.4Internal Revenue Service. Single Member Limited Liability Companies
Electing S Corporation Treatment
If the default classification doesn’t suit you, Form 8832 lets your LLC elect to be taxed as a C corporation.5Internal Revenue Service. Form 8832, Entity Classification Election More often, small business owners are interested in S corporation status, which can reduce self-employment taxes by letting the owner take a reasonable salary (subject to payroll taxes) and distribute remaining profits free of self-employment tax.
To elect S corp treatment, file Form 2553 no later than two months and 15 days after the beginning of the tax year you want it to take effect, or at any time during the preceding tax year. S corp eligibility comes with limits: no more than 100 shareholders, all shareholders must be U.S. residents (individuals, estates, or certain trusts), and only one class of ownership interest is allowed.6Internal Revenue Service. Instructions for Form 2553 The election is powerful but adds payroll administration and compliance costs. Given the tight filing window, running the numbers with a tax professional before electing is worth the fee.
Keep Your Liability Shield Intact
An LLC gives you limited liability on paper, but courts can disregard that protection (a concept called “piercing the corporate veil”) if you treat the LLC as an extension of yourself. The common grounds are mixing personal and business finances, underfunding the company at formation, and using the entity to commit fraud.
Practices that keep the shield intact:
- Keep a dedicated business checking account and never pay personal expenses from it. If you cover a business purchase with personal funds, reimburse yourself through the business account and document it.
- Use a credit card in the LLC’s name for business expenses so there’s a clean paper trail.
- Maintain clean books, reconcile accounts regularly, and keep your operating agreement current.
- Fund the LLC with enough money or assets to operate credibly. An LLC formed with zero capital and no insurance looks like a shell designed to avoid liability, which is exactly what a creditor will argue in court.
- Follow your own operating agreement. If it says members vote on major purchases, actually hold the votes and document them. Ignoring your own governance is one of the clearest signs a court looks for.
Stay Compliant After Formation
LLC obligations don’t end once the state approves your articles. Most states require periodic reports (annually or biennially) confirming the business address, registered agent, and members or managers. Fees range from $0 to several hundred dollars. Missing a deadline can mean late fees, loss of good standing, and eventually administrative dissolution.
Some states also require an initial report shortly after formation, often within 90 days, separate from the recurring report. Check your state’s deadlines as soon as the LLC is approved so you don’t fall out of compliance in year one.
Insurance and Licenses
If you carried business insurance as a sole proprietor, contact your insurer to update the named insured to the LLC. A gap in coverage, even for a day, can leave you exposed, and some industries impose fines for coverage lapses. Put the new policy in place before canceling the old one, and notify any landlords, clients, or lenders who require proof of insurance. Professional and occupational licenses held in your individual name or under your old structure also need to be updated or reissued, usually with a copy of the Certificate of Formation.
Operating Across State Lines
If your LLC does business beyond its home state (maintaining a physical office, employing workers, or regularly contracting in another state), you may need to register as a “foreign” LLC there. Skipping that step can mean fines, back taxes, and losing the right to enforce contracts or sue in that state’s courts. Owning real property or completing isolated transactions typically doesn’t trigger the requirement, but the threshold varies.
Federal Beneficial Ownership Reporting
The Corporate Transparency Act originally required most domestic LLCs to file a Beneficial Ownership Information report with the Financial Crimes Enforcement Network. Under an interim final rule published in March 2025, domestic LLCs and other U.S.-formed entities are exempt from that requirement. The reporting obligation now applies only to entities formed under foreign law that have registered to do business in a U.S. state.7FinCEN.gov. Small Entity Compliance Guide