The U.S. Census Bureau recorded 5.6 million new business applications in 2025 alone, and the overwhelming majority chose the LLC structure. Forming an LLC is genuinely straightforward — but the process has state-specific details that can cost you hundreds, or even thousands, of dollars if you don’t know them going in. California’s annual franchise tax, New York’s publication requirement, and the common mistake of forming in Delaware when you actually operate in Ohio are all examples of traps that catch unprepared founders every year.
This guide covers all seven steps to form an LLC, the real costs by state (not just the filing fee), current processing times, and the post-formation compliance tasks most guides skip entirely. By the end, you’ll know exactly what to do, in what order, and how much it will cost in your specific state.
- LLC formation involves 7 core steps: name, registered agent, Articles of Organization, operating agreement, EIN, bank account, and licenses.
- State filing fees range from $35 (Montana) to $520 (Massachusetts), but true year-one costs including annual reports and registered agents range from $105 to over $1,000.
- Online filing averages 4.2 business days; nine states process instantly. Texas takes 13-15 business days.
- As of March 21, 2025, domestic LLCs are no longer required to file Beneficial Ownership Information (BOI) reports with FinCEN under the Corporate Transparency Act.
- Getting an EIN from the IRS is free and takes about 10 minutes online. Third-party services that charge $50-$300 for this are unnecessary.
What Is an LLC and Why It’s the #1 Business Structure in America
A Limited Liability Company (LLC) combines two features that business owners need most: personal liability protection and pass-through taxation. The liability protection means that if your business is sued or carries debt, your personal assets — your home, savings, and car — are generally shielded from creditors. Pass-through taxation means the LLC itself doesn’t pay federal income tax; profits and losses flow directly to the members’ personal tax returns, avoiding the double taxation that affects C-corporations.
Those two features explain why LLCs now account for roughly 85% of all new US business entity formations, according to data tracked by SmallBizStatistics.com from the Census Bureau’s Business Formation Statistics. The U.S. has 36.2 million small businesses employing 62.3 million people (SBA Office of Advocacy, February 2026), and the LLC is the dominant legal home for most of them. The structure works for solo consultants, real estate investors, family businesses, and growing startups alike.
[IMAGE: Illustration of a business owner reviewing LLC documents at a desk – search terms: business owner LLC formation paperwork desk]The table below shows how the LLC compares to the two most common alternatives on the dimensions that matter most when you’re choosing a structure.
| Feature | Sole Proprietorship | LLC | Corporation (C-Corp) |
|---|---|---|---|
| Personal liability protection | None | Yes (when maintained) | Yes |
| Formation cost | $0 | $35–$520 state filing fee | $50–$500+ |
| Federal taxation | Pass-through | Pass-through (default) | Double taxation |
| Self-employment tax | Full SE tax | Full SE tax (default); reducible via S-corp election | Salary subject to payroll tax |
| Annual maintenance | None | Annual report + fee in most states | Annual report, meetings, minutes |
| Investor-ready | No | Limited (membership interests) | Yes (stock, VC compatible) |
| Complexity | None | Low-moderate | High |
The short version: if you’re running a business of any kind and you’re not raising venture capital, an LLC is almost always the right call. Sole proprietorships leave your personal assets exposed. Corporations require formal governance that most small businesses don’t need and trigger double taxation unless you elect S-corp status separately.
How Much Does It Cost to Form an LLC? (Real Numbers by State)
The filing fee is the number most people look up first, and it ranges from $35 in Montana to $520 in Massachusetts (LLC University). But that fee is only one part of what you’ll actually spend in year one. Annual report fees, registered agent costs, and state-specific surprises like California’s franchise tax or New York’s publication requirement can push your first-year total well past $1,000 in some states.
The chart above shows the filing fee spread, but the table below shows what you’ll actually spend in your first year. The annual report fee and registered agent cost are both recurring, so they matter more than the one-time filing fee over the life of your business.
| State | Filing Fee | Annual Report Fee | Registered Agent (~est.) | Year-One Total |
|---|---|---|---|---|
| Montana | $35 | $20 | $50 | $105 |
| Kentucky | $40 | $15 | $50 | $105 |
| Wyoming | $100 | $60 | $50 | $210 |
| New Mexico | $50 | $0 | $50 | $100 |
| Florida | $125 | $138 | $50 | $313 |
| Delaware | $90 | $300 | $50 | $440 |
| Nevada | $425 | $350 | $50 | $825 |
| California | $70 | $800 (franchise tax) | $50 | $920 |
| Tennessee | $300 | $300 | $50 | $650 |
| Massachusetts | $520 | $500 | $50 | $1,070 |
New Mexico is worth noting separately: it has no annual report requirement, making it one of the lowest-maintenance states in the country. New York has a low annual report fee ($9) but imposes a publication requirement in some counties that can add $1,200 to $2,000 if your LLC is based in New York City or the surrounding metro counties.
How Long Does It Take to Form an LLC?
Online filing averages 4.2 business days to receive your approved Articles of Organization. Mail filing averages 9.5 business days processing time, plus transit time in both directions. These averages from LLC University mask a wide range: nine states process online filings instantly, while Texas takes 13-15 business days and Maryland typically runs about two weeks.
Most states offer expedited processing for an additional fee, typically $50-$100. If you’re in Texas or Maryland and need your LLC approved quickly, expedited service is worth it. Otherwise, plan your timeline around standard processing and don’t commit to client contracts or lease agreements before your LLC is officially approved.
1 Choose Your LLC Name
Your LLC name must include “Limited Liability Company,” “LLC,” or “L.L.C.” at the end. Most states also accept “Limited Liability Co.” or “Ltd. Liability Company,” but “LLC” is the standard. The name must be distinguishable from other registered business names in the same state, meaning it can’t be confusingly similar to an existing entity’s name.
Before you file anything, run a name search on your state’s Secretary of State website. Every state has a free business entity search tool. If the name you want is taken, you’ll need an alternative before your filing will be accepted. Common reasons for rejection: nearly identical names (swapping “and” for “&” doesn’t make a name distinguishable), names implying a government connection, and names using restricted words like “Bank,” “Insurance,” or “University” without the required approval.
If you want to reserve a name while you’re still setting up, most states allow a name reservation for 30-120 days for a small fee ($10-$40). This locks in the name before you file.
If you want to operate under a name different from your registered LLC name, you can file a “Doing Business As” (DBA) or fictitious business name. For example, “Riverside Holdings LLC” could do business as “Riverside Home Services.” DBAs are filed with the county clerk or state depending on your location and typically cost $10-$50.
2 Designate a Registered Agent
A registered agent is the person or company officially authorized to receive legal documents on behalf of your LLC, including lawsuits, government notices, and tax correspondence. Every LLC must have one. The requirement is that the registered agent must have a physical street address (no P.O. boxes) in the state where the LLC is registered and must be available during standard business hours, Monday through Friday.
You have three options. First, you can serve as your own registered agent if you have a physical address in the state and are reliably available during business hours. Second, a business partner or employee can serve as the registered agent. Third, you can hire a registered agent service, which typically costs $50-$300 per year.
Consequences of not maintaining a valid registered agent are serious: the state can administratively dissolve your LLC, meaning it loses its legal standing. Any legal notices served to an old address that doesn’t reach you are still considered valid service. If you miss a lawsuit notice, you can lose a default judgment without ever knowing a case was filed.
3 File Your Articles of Organization
The Articles of Organization (called Certificate of Formation in Texas and Delaware, Certificate of Organization in some other states) is the document that legally creates your LLC. This is the core filing. Once the state approves it and returns your stamped copy, your LLC exists.
The Articles of Organization typically require four pieces of information: your LLC’s name, your registered agent’s name and address, your LLC’s principal business address, and the organizer’s name and signature. Some states ask for additional information such as whether the LLC is member-managed or manager-managed, the names of all members, or the LLC’s purpose. Most states accept a general statement like “any lawful business purpose.”
File online through your state’s Secretary of State website. Nearly every state now offers online filing, which is faster and less prone to errors than mailing a paper form. Pay the filing fee by credit card. You’ll receive a confirmation immediately, and the approved Articles of Organization (with the state’s official stamp) will be emailed within the state’s processing window.
Keep your approved Articles of Organization permanently. You will need to present this document when opening a bank account, applying for business licenses, entering contracts, and if you ever go through a business sale or legal proceeding. Store both a digital copy and a physical copy.
4 Create an Operating Agreement
The operating agreement is the internal document that governs how your LLC operates. It’s not filed with the state (except in a few jurisdictions), but it is the most important document your LLC will have. Courts treat a well-drafted operating agreement as the definitive guide to how disputes should be resolved among members.
Only five states currently require an operating agreement by law: New York, California, Missouri, Maine, and Delaware. Every other state technically allows you to operate without one. You should have one regardless of where you’re located. Without an operating agreement, your LLC is governed by your state’s default LLC statutes, which may not reflect what you and your co-founders actually agreed to.
For single-member LLCs, the operating agreement still matters because it reinforces the separation between you and the LLC. Without it, a court in a liability dispute may be more likely to find that the LLC was not genuinely operating as a separate entity — a concept called “piercing the corporate veil.”
A complete operating agreement covers: ownership percentages (membership interests), how voting works, how profits and losses are distributed, what happens when a member wants to leave, what happens if a member dies or becomes incapacitated, how major decisions are made, how the LLC can be dissolved, and restrictions on transferring membership interests to outside parties.
5 Get an EIN from the IRS (Free, 10 Minutes)
An Employer Identification Number (EIN) is your LLC’s federal tax identification number, equivalent to a Social Security number for the business. The IRS uses it to track your business tax filings, and banks require it to open a business account.
You need an EIN even if your LLC has no employees. Single-member LLCs that are disregarded entities for tax purposes technically don’t always need one for federal income tax filing, but every bank will require one to open a business checking account, and many vendors and clients will ask for it on W-9 forms.
Applying for an EIN through the IRS is free and takes about 10 minutes online. The application is available at IRS.gov. You complete the online questionnaire, confirm your information, and your EIN is issued immediately on screen. Print or save the confirmation page — this is your EIN letter, and you will need it for bank account opening.
The IRS online EIN application is available Monday through Friday, 7 a.m. to 10 p.m. Eastern time. If you apply outside those hours, you can complete the form and receive your EIN the next business day. If your LLC has foreign members (non-U.S. persons), the online application is not available and you’ll need to apply via Form SS-4 by mail or fax.
6 Open a Business Bank Account
Separating your business and personal finances is not optional from a liability standpoint. Commingling funds — depositing business income into your personal account, paying business expenses from your personal debit card — is one of the most common ways courts pierce the corporate veil and hold LLC members personally liable for business debts. The entire purpose of forming an LLC is undermined if you don’t maintain a separate financial identity for the business.
To open a business bank account, you’ll need: your EIN confirmation letter from the IRS, your approved Articles of Organization, your operating agreement, and a government-issued ID. Some banks also ask for a business license if your state requires one. Bring all of these when you go, or have them scanned if you’re opening online.
For new LLCs, online business banking options have become practical alternatives to traditional banks. Mercury and Relay are popular no-fee options for startups and small businesses. Chase Business Complete is a common choice if you prefer in-person banking access across the country. None of these is specifically endorsed here — evaluate fees, minimum balance requirements, and whether you need cash deposit capability for your specific business.
The principle is straightforward: every dollar your business earns goes into the business account. Every business expense is paid from the business account. Your salary or draw moves from business to personal as a documented transfer. This paper trail is exactly what protects you in a legal dispute.
7 Obtain Required Business Licenses and Permits
An approved LLC is not the same as a licensed business. Depending on your industry, location, and activities, you may need additional licenses and permits before you can legally operate. The LLC is a legal structure; licenses govern what you’re allowed to do within that structure.
Federal licenses apply to a narrow set of industries: alcohol manufacturing and distribution (TTB), commercial fishing, firearms dealers and manufacturers (ATF), interstate trucking and transportation (FMCSA), and a few others. Most small businesses don’t need a federal license.
State business licenses are more common. About 30 states require a general business license or privilege license for operating within the state. This is separate from industry-specific licenses. Check your state’s small business licensing portal — most states have a consolidated site now where you can enter your business type and location and get a complete list of required licenses.
Local and city permits matter for home-based businesses. Many municipalities restrict commercial activity in residential zones, and you may need a home occupation permit. If you plan to have customers come to your home, inventory stored on-site, or employees working from your home address, check with your city or county planning department before you open.
Professional licenses apply if you’re practicing a regulated profession: medicine, law, accounting, real estate, contracting, financial advising, and others. In most cases you cannot operate through an LLC in a licensed profession without the appropriate professional license for the individuals delivering the service, and some states require a Professional LLC (PLLC) designation instead of a standard LLC.
If you’re selling physical goods, a sales tax permit (sometimes called a seller’s permit or resale certificate) is required in every state that has a sales tax. This registers you with your state’s revenue department to collect and remit sales tax.
Post-Formation Compliance Checklist (What Most Guides Skip)
Forming the LLC is the beginning of your compliance obligations, not the end. Most LLC guides stop after step 7. The items below are what separate LLCs that maintain their legal protections from those that unknowingly become vulnerable.
- File your annual report on time every year. Most states require it; fees range from $9 (NY) to $500 (MA). Missing it triggers late fees and eventual administrative dissolution.
- Keep your registered agent information current. If your registered agent changes, file an update with the Secretary of State immediately.
- Register for state taxes. Most states require separate registration with the state’s department of revenue for income tax, sales tax (if applicable), and employer taxes (if you hire employees).
- Maintain a separate business bank account and credit card from day one. Never let this slip, even temporarily.
- Document major decisions with written resolutions. Opening a new bank account, taking on significant debt, adding a member, or selling a major asset should all be documented in a written resolution signed by the members.
- Renew licenses and permits annually. Business licenses, seller’s permits, and professional licenses typically require annual renewal.
- Update your operating agreement when ownership or management changes. An outdated operating agreement is nearly as bad as no agreement.
- Review your registered agent contract annually. Service contracts can lapse silently.
LLC Tax Classifications Explained
When you form an LLC, the IRS assigns it a default tax classification based on the number of members. A single-member LLC is treated as a disregarded entity — its income and expenses are reported on Schedule C of the owner’s personal Form 1040, the same as a sole proprietorship. A multi-member LLC is treated as a partnership by default and files Form 1065, with each member receiving a K-1.
Neither default classification changes what you can elect. LLCs can choose to be taxed as an S-corporation or C-corporation by filing the appropriate election with the IRS.
The S-corp election is the most relevant for growing single-member or small LLCs. When your LLC is taxed as an S-corp, you pay yourself a reasonable salary (subject to payroll taxes) and take additional profit as a distribution (not subject to self-employment tax). At $75,000 in net profit, this structure saves approximately $2,948 per year in self-employment taxes. At $150,000 net profit, the savings reach approximately $10,485 per year. These figures assume a reasonable salary of roughly 60% of net profit and reflect 2025 SE tax rates. Consult a CPA to model the actual numbers for your situation, because the S-corp election adds payroll compliance costs that must be weighed against the tax savings.
The C-corp election is almost never the right choice for a small LLC. C-corps pay corporate income tax, and then shareholders pay income tax again on dividends — the classic double-taxation problem. C-corps make sense for companies pursuing venture capital investment or planning to issue traditional stock options, but that’s a different situation from the typical small business LLC.
The general threshold: if your LLC’s net profit exceeds $50,000-$60,000 per year consistently, discuss an S-corp election with your accountant. Below that threshold, the payroll compliance overhead typically outweighs the tax savings.
State-Specific Considerations Before You Choose Where to Form
The idea of forming in Wyoming, Delaware, or Nevada because of their business-friendly reputations is one of the most persistently misunderstood strategies in small business. Here’s the core problem: if you operate your business in California, Texas, or New York, those states require you to register as a foreign LLC in the state where you actually conduct business, even if you formed the LLC elsewhere. Foreign LLC registration costs roughly the same as domestic formation, and you still pay that state’s taxes and annual fees.
The result is that you pay fees in two states, deal with two sets of annual reports, and maintain registered agents in both states. For a small business with operations in one state, this is pure overhead with no meaningful legal benefit.
Delaware formation makes sense in specific situations: you’re raising venture capital funding (investors expect Delaware C-corps or LLCs), you anticipate litigation and want access to Delaware’s Court of Chancery (highly specialized business law court), or you’re structuring complex ownership with multiple classes of membership interests. For a solo consultant or service business, Delaware offers nothing a domestic LLC in your home state doesn’t.
Three states impose a publication requirement: New York, Arizona, and Nebraska. After forming an LLC in these states, you must publish a notice of formation in local newspapers for several weeks. In New York City and the surrounding metro counties, this requirement can cost $1,200 to $2,000 or more, because you must publish in two newspapers for six consecutive weeks. Budget for this before you form in those states.
Community property states have additional implications for married LLC owners. In Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, a spouse may have an ownership interest in an LLC formed during the marriage even if they’re not listed as a member. This affects your operating agreement language and is particularly important to address before adding any other members to the LLC.
Frequently Asked Questions
Can I start an LLC by myself?
Yes. Single-member LLCs are the most common LLC type in the United States. You are the sole owner and can manage it yourself (member-managed) or designate a manager. Single-member LLCs are taxed as disregarded entities by default, meaning you report business income on your personal tax return. You do not need a co-founder or any other members to form an LLC.
Do I need a lawyer to form an LLC?
No. The Articles of Organization is a straightforward state form that most people can complete without legal help. However, an attorney is worth the cost in specific situations: multi-member LLCs (for a proper operating agreement with buy-sell provisions), LLCs in regulated industries, real estate LLCs with complex ownership structures, or any situation involving significant assets being transferred into the LLC. For a solo freelancer or single-member service business, DIY formation is entirely reasonable.
How much does it cost per year to maintain an LLC?
Minimum annual maintenance costs include the annual report fee (varies by state: $0 in New Mexico to $500 in Massachusetts), your registered agent fee if you use a service ($50-$300), and any state franchise or privilege taxes. California’s $800 minimum franchise tax is the highest recurring cost in the country. In low-cost states like Montana, Kentucky, or New Mexico, annual maintenance can be under $100 once the LLC is formed.
What’s the difference between an LLC and a corporation (Inc)?
Both protect personal assets from business liability, but they differ in taxation and governance. Corporations are taxed as C-corps by default (double taxation) unless they elect S-corp status. LLCs pass income through to members’ personal returns by default and can also elect S-corp or C-corp taxation. Corporations require formal governance (board of directors, annual meetings, corporate minutes); LLCs have flexible management structures. Corporations issue stock; LLCs have membership interests. For most small businesses, the LLC’s tax flexibility and lighter governance requirements make it the better choice. See the full comparison guide.
Can I form an LLC in a different state from where I live?
Yes, but it’s usually not worth it. If you form an LLC in Wyoming while living and working in Florida, Florida will require you to register your Wyoming LLC as a foreign LLC in Florida. You’ll pay both states’ fees, maintain registered agents in both states, and file annual reports in both states. The exception is if you have a specific reason for another state — like Delaware for venture-backed companies. Otherwise, form in your home state and save the extra fees and administrative overhead.
Conclusion
Starting an LLC comes down to seven steps: choose your name, designate a registered agent, file Articles of Organization, draft an operating agreement, get your EIN, open a business bank account, and secure the required licenses. The most important single step is filing the Articles of Organization with your state’s Secretary of State, because that’s the action that legally creates your LLC. Get the EIN immediately after that — it’s free, takes 10 minutes, and you need it for the bank account. From there, treat your LLC like the separate legal entity it is, keep finances separate, and file annual reports on time. Those habits are what make the liability protection real.
[INTERNAL-LINK: how to get an EIN → /ein-number/]
Sources: U.S. Census Bureau Business Formation Statistics (census.gov/econ/bfs); SBA Office of Advocacy, Frequently Asked Questions About Small Business, February 2026 (advocacy.sba.gov); LLC University, LLC Filing Fees by State (llcuniversity.com); IRS EIN Online Application (irs.gov); FinCEN BOI Press Release, March 21, 2025 (fincen.gov/boi).