Starting a Limited Liability Company (LLC) is a smart and flexible way to establish your business as it balances the personal asset protection of a corporation with the simplicity and tax advantages of a sole proprietorship.

Whether you’re launching a new venture or restructuring an existing one, starting an LLC provides a solid foundation for growth. In this guide, we’ll walk you through the process of how to start an LLC, ensuring you have everything you need to quickly get up and running and take your business to the next level.

Steps to Form an LLC

Forming an LLC is generally a straightforward process, though specific requirements may vary depending on your state. To help you get started, we’ve broken it down into seven key steps:

1. Selecting a State
2. Naming Your LLC
3. Appointing a Registered Agent
4. Filing Your Articles of Organization
5. Creating Your Operating Agreement
6. Getting an EIN
7. Filing a Beneficial Ownership Information (BOI) Report

In the sections below, we’ve explored each of these steps in greater detail so that you can get started forming your LLC with confidence.

Step 1: Select a State

The first step of the LLC formation process is to select a state. In the majority of cases, the best option for this will be to start your LLC in either your home state or the state your business will primarily operate from — where it will be considered a “Domestic LLC”.

This is because it’s usually the least expensive and complicated option if you only operate in one state. 

States like Nevada, Delaware, and Wyoming have a reputation for providing LLC-friendly business environments because of the low LLC filing fees and low franchise taxes.

While these states offer tax and filing benefits to business owners who live in and conduct business within them, they offer little benefit to those who operate outside them.

This is because any LLC formed in these states (but operating outside of them) will also need to register in their home state, paying registration and maintenance fees twice.

Step 2: Name Your LLC

After selecting the state in which to start your LLC, the next step is to come up with a unique name to submit alongside your formation documents.

When naming your LLC, remember that there are several standard rules that typically apply, including that:

• Names must include one of the following terms or abbreviations: “Limited Liability Company”, “Limited Company”, “LLC”, or “L.L.C.”. Additionally, the words “Limited” and “Company” may be abbreviated as “Ltd.” and “Co.” respectively.
• Names are not allowed to contain words that may lead to confusion between the business and a government agency (e.g., State Department, FBI, etc.).
• Words such as “Bank”, “University”, and “Insurance” — as well as those associated with licensed professions (e.g., doctors, lawyers, engineers, or accountants) — are often restricted and may require additional paperwork.

Once you have a name in mind, you’ll need to make sure it’s not already in use by another business registered in the state — to check this, you’ll have to conduct an LLC Name Search in your state to ensure your desired name is actually available for registration.

At this point, it’s also important to confirm that there’s a matching domain available for your desired name before you commit to it — which can easily be done by performing a quick domain name search on a trusted registrar.

Did you know? One of the most common reasons that LLC formation requests are rejected is due to an error in the name.

Step 3: Appoint a Registered Agent

All 50 states require LLCs to appoint a registered agent for their business, which is also referred to as a “resident agent”, “statutory agent”, or “agent for service of process”.

Put simply, this is essentially just an individual or business entity that is responsible for sending and accepting important legal documents on your LLC’s behalf, such as:

• Tax forms and notices
• Legal documents
• Summons and lawsuit notices
• Annual reports and other government correspondence

You can either perform this role yourself or appoint an individual or entity to do it for you, as long as they meet the following requirements:

• Must be 18 years or older
• Must have a physical address in the state where your business is formed
• Must be available in person during normal business hours

However, for added protection, privacy, and peace of mind, the best option is typically to hire a professional registered agent service to perform this role for your LLC as these services offer a level of reliability and convenience that cannot be matched by an untrained individual.se services offer a level of reliability and convenience that cannot be matched by an untrained individual.

Step 4: File Your LLC Articles of Organization

With all of the above steps out of the way, you’ll be ready to legally register your LLC.

In most states, this is done by submitting a document called the Articles of Organization with the Secretary of State — though in some states this is called a “Certificate of Formation” or “Certificate of Organization”.

This is a formation document that summarizes your LLC’s key information, including its:

• Business name
• Owners/members
• Date of formation
• Registered agent’s details
• Duration of business
• Physical and filing addresses

You can typically submit your Articles of Organization online, by mail, or in person alongside a filing fee that varies between $50 and $500, depending on your state.

However, we normally recommend using a professional LLC formation service to complete this step, as it will save you time and reduce the risk of any errors or delays in the process (some of them are also completely free!).

Select Member-Managed or Manager-Managed

Before filing your Articles of Organization, you’ll need to take a moment to decide how your business will be managed, as there are two distinct management structures an LLC can have:

• Member-managed: This describes a structure under which an LLC’s members are the ones actively running the daily operations and management of the company.
• Manager-managed: Under this structure, an LLC’s members appoint managers (who can be members or non-members) to oversee the needs of the LLC on a daily basis, so that the members can focus more on high-level decision-making and growing the business.

To find out more about the differences between these two management structures, be sure to check out our Member Managed vs Manager Managed LLC article.

Step 5: Create Your LLC Operating Agreement

An Operating Agreement is a legal document that defines your LLC’s ownership structure and member roles and duties.

These don’t typically need to be filed with the state, and are just meant to be stored internally in order to prevent misunderstandings about roles and responsibilities and provide a clear framework on how the business is meant to be run and manage any potential challenges.

It does this by outlining the LLC’s operational rules, ownership details, and procedures in six key sections:

1. Organization
2. Management and Voting
3. Capital Contributions
4. Distributions
5. Membership Changes
6. Dissolution

While most states don’t require LLCs to have an operating agreement, you’ll need to draft one up if you’re planning to start an LLC in any of the following states:

• California
• Delaware
• Maine
• Missouri
• Nebraska
• New York

However, even if an operating agreement isn’t required in your state, it’s advisable to create one so that your LLC’s members can make well-informed financial and management decisions.

Note: For more information on operating agreements, we recommend having a look at our LLC Operating Agreement guide.

Step 6: Get an EIN for Your Business

An Employer Identification Number (EIN) is a nine-digit number assigned by the US Internal Revenue Service (IRS) to identify and tax businesses.

This number — which is also known as the “Federal Employer Identification Number” or the “Federal Tax Identification Number” — essentially acts as the Social Security Number (SSN) of your LLC.

Obtaining an EIN will be mandatory for an LLC to be able to complete several key tasks, such as:

• Opening a Business Bank Account: Most banks require an EIN to open a business account, even for single-member LLCs.
• Having Multiple Members: Multi-member LLCs are treated as partnerships by default for tax purposes and must have an EIN to file taxes.
• Hiring Employees: The IRS requires an EIN to manage payroll and file employment taxes.
• Being Taxed as a Corporation: An EIN is necessary for filing corporate tax returns.

You can obtain an EIN for your LLC quickly and easily by applying online directly through the IRS website, or submitting a request by fax or mail.

Step 7: File a BOI Report

Starting January 2024, the vast majority of LLC owners will be required to file a Beneficial Ownership Information (BOI) Report with the US Financial Crimes Enforcement Network (FinCEN).

Depending on when it was formed, LLCs must file a BOI report with FinCEN by the following deadlines:

• Existing LLCs: Anytime between January 1, 2024 and January 1, 2025
• New LLCs: 90 days from their formation date (30 days if formed from 2025 and onwards)

Keep in mind that failure to file your LLC’s BOI report on time can result in fines of up to $591 per day and even jail time of up to two years.

It’s worth being aware that not every LLC owner is required to file a BOI report, as certain exemptions do apply — such as companies with more than 20 full-time employees, accounting firms, and banks.

Note: You can find a full list of BOI report filing exemptions by having a look at FinCEN’s website.

After Forming Your LLC

Completing the steps outlined above and forming your LLC is just the beginning of setting up a successful business.

Even once your LLC is officially established, there are several important steps you’ll need to take to ensure your business remains compliant with state and federal laws and operates smoothly.

Filing Your Annual Report

One of the most important aspects of maintaining your LLC’s compliance with state regulations is submitting the Annual Report — which is also known as a Biennial Report in some states.

In most states, LLCs will be required to submit this filing with the Secretary of State in order to keep the state’s records updated with their most recent business information.

In particular, the annual report you’ll need to submit must typically include:

• Your LLC’s official name
• The name and address of your registered agent
• The principal business address
• Names and addresses of LLC members or managers (if required)

Failing to file your annual report can result in penalties, such as fines or even the dissolution of your LLC, making it crucial to meet this requirement on time.

Note: Annual report deadlines and filing requirements vary depending on the state you’re based in. Find out what’s required in yours by checking out our state-specific How to Start an LLC guide.

Registering for LLC State Taxes

After forming your LLC, you’ll likely need to register for certain additional taxes on top of income and self-employment taxes, depending on the nature of your business and where you’re based.

Some of the most common state taxes to consider include:

• Sales Tax: If your LLC sells physical products or taxable services, you’ll likely need to register for a sales tax permit and collect sales tax from customers.
• Employer Taxes: If your LLC has employees, you may need to register for state payroll taxes, such as unemployment insurance or workers’ compensation.
• Franchise Tax: Some states require LLCs to pay an annual franchise tax, which is a fee for the privilege of operating in the state.

Registering for these state taxes — as well as any other relevant taxes your business is liable to pay — is an essential part of ensuring your LLC remains compliant and avoids penalties or fines.

Note: You can make sure your business is fully compliant with your state’s requirements by checking out our comprehensive LLC Taxes guide.

Obtaining Licenses, Permits, and Insurance

Another key aspect of making sure your LLC is operating legally is to secure the necessary licenses, permits, and insurance.

Depending on the specific industry, location, and nature of your business, the permits and licenses it will need can vary. Alongside checking with the relevant federal agency for your industry, you’ll also need to check these requirements with your state and local government offices to cover all bases.

Some common examples permits and licenses that businesses commonly need include:

• Transportation and logistics licenses
• Liquor permits
• Environmental permits
• Zoning permits

Along with licenses and permits, you also need to ensure that your business carries the proper insurance policies — these will not only protect your business assets in the case of damage or loss, but can also help get you in the door when bidding on jobs or renting an office space too.

Follow Hiring Requirements

The final thing to bear in mind after forming your LLC is that there are a number of different legal compliance requirements you’ll need to follow if you plan to hire employees.

The main ones to be aware of include:

• Confirming that new hires are legally eligible to work in the US
• Reporting new hires to the state agency that handles your state’s new hire reporting program (you must report new employees within 20 days of hiring)
• Withholding employee taxes
• Purchasing workers compensation insurance
• Paying employees at least the state and federal minimum wage

LLC Formation

Resources

• IRS – Limited Liability Companies
• LLC Fit

For all related articles, have a look at our LLC Formation Resources page