Forming an LLC means filing paperwork with your state to create a legal entity separate from you personally, then working through a handful of steps in roughly this order: pick a name your state will accept, name a registered agent, file your formation document, write an operating agreement, get a federal tax ID number, and handle any follow-up filing your state requires. The exact forms, fees, and deadlines vary by state, so treat what follows as the map — fill in the local details from your own Secretary of State's website.
Before you start, know what an LLC actually buys you: liability protection, mainly. It doesn't, by itself, change how you're taxed. An LLC has no tax classification of its own. A one-owner LLC is taxed like a sole proprietorship by default (income and expenses go on Schedule C of your personal return); a multi-owner LLC is taxed like a partnership by default. Either can later elect corporate taxation, including S-corporation status, if that makes sense — a separate decision from forming the LLC, worth discussing with a CPA first.
What to do, in order
Choose a name that meets your state's rules. Most states require the name to be distinguishable from other registered businesses and to include a designator like "LLC" or "Limited Liability Company." Most Secretary of State websites have a free name search so you can check availability before filing. If you'll operate under a different name than your LLC's legal name, you may also need to register a "doing business as" (DBA) name — a separate, usually state- or county-level filing.
Appoint a registered agent. States require an LLC to have a registered agent — a person or company with a physical address in the state who agrees to accept legal papers and official state mail on the LLC's behalf during business hours. You can usually serve as your own registered agent if you have a real street address there and are reliably available, or use a commercial registered agent service; weigh privacy, reliability, and cost when you decide.
File Articles of Organization (or a Certificate of Formation) with your Secretary of State. This is the document that legally creates the LLC, asking for its name, registered agent, business address, and sometimes the names of its owners (members) or managers. There is a state filing fee, and it varies by state — check your Secretary of State's website for the current amount rather than a number you saw elsewhere.
Write an operating agreement. This internal document spells out who owns what percentage of the LLC, how profits and losses are split, how decisions get made, and what happens if a member leaves. Many states don't legally require one, especially for a single-member LLC, but skipping it is a common source of regret — without one, your LLC defaults to your state's generic LLC statute, which may not fit how you want to run things. It's worth putting one in place even when your state doesn't require it.
Get an Employer Identification Number (EIN) from the IRS. An EIN is a federal tax ID for your business, similar to a Social Security number. You'll need one to open a business bank account, hire employees, and file certain tax returns, even as a single-member LLC with no employees. Getting one is free and takes a few minutes at irs.gov. Watch out for paid "EIN filing service" sites — more below.
Handle any publication or initial-report requirement. A small number of states require publishing a notice of your new LLC in local newspapers for a set period, and many require an "initial report" within a set window after formation — separate from the annual report you'll owe later. Whether either applies to you, and the deadline and cost, depends entirely on your state. Check your Secretary of State's instructions for new LLCs so you don't miss a step only your state requires.
Don't pay for what the IRS gives you for free
Getting an EIN directly from the IRS costs nothing and takes about as long as a short web form. Several commercial "business formation" sites are built to look official and charge a fee — sometimes framed as a "rush" or "processing" fee — to submit the exact same free application for you. If a site asks you to pay specifically for your EIN, close the tab and go to irs.gov directly. The same caution applies to paid LLC "formation packages": some bundle in genuinely useful help, but many just resell state forms and free federal filings at a markup, sometimes with recurring charges you didn't expect. Know what you're being charged for before paying anyone to do a step you could do yourself for free or for the state's own filing fee.
After you file: staying in good standing
Most states require an ongoing filing after formation — often an annual report, biennial report, or in some states a franchise tax filing — to keep your LLC in good standing. Missing it can eventually get your LLC administratively dissolved, which strips away the liability protection you formed it for in the first place. The due date, the fee, and even what your state calls the filing all vary, so put your state's specific deadline on your calendar as soon as you find it on your Secretary of State's site — don't assume it matches a different state's rule.
What an LLC changes about your taxes — and what it doesn't
Whether you're a sole proprietor or the sole member of an LLC, the tax mechanics are largely the same: you report business income on your personal return, and because no employer withholds for you, you generally pay estimated taxes to the IRS during the year rather than all at once in April. You also owe self-employment tax — 15.3%, made up of 12.4% for Social Security (up to an annually adjusting wage base) plus 2.9% for Medicare, covering both the employee and employer shares — on top of ordinary income tax. Many self-employed people and pass-through business owners can also deduct up to 20% of their qualified business income under the Section 199A deduction, subject to income limits and other rules that can change — confirm the current rules at irs.gov before counting on a number. The standard mileage rate, the Social Security wage base, and similar figures are adjusted annually; look up the current-year figure on irs.gov rather than relying on one you remember.
What liability protection does and doesn't cover
An LLC generally shields your personal assets — your house, your savings — from the LLC's business debts and lawsuits against the LLC. It isn't absolute, though. It typically won't shield you from a personal guarantee you signed for a business loan or lease, from your own negligence or fraud, or from unpaid payroll taxes withheld from employees' paychecks (that's trust-fund money; the IRS can pursue "responsible persons" personally under the Trust Fund Recovery Penalty, even behind an LLC). Courts can also disregard the protection — "piercing the corporate veil" — if you commingle personal and business funds or ignore the LLC's formalities. Sole proprietors and general partners, by contrast, have unlimited personal liability, and a general partner can be on the hook for a co-partner's business acts. If your business later runs into debt it can't pay, how business bankruptcy and personal guarantees are handled is its own topic; this guide focuses on formation.
If you plan to hire
Forming an LLC doesn't by itself make you an employer, but a few federal duties kick in once you bring on help. Whether someone is legally an employee or an independent contractor is a factual question about the real working relationship — the IRS applies a common-law control test, the Department of Labor an economic-reality test under the FLSA, and some states a stricter ABC test — not a choice made by agreement or job title. Getting it wrong creates back-tax and back-wage liability, so classify honestly based on how the work really operates. Certain federal anti-discrimination laws also only apply above an employee-count threshold: Title VII and the ADA at 15 or more employees, the ADEA at 20 or more, and the FMLA at 50 or more within 75 miles. The employer's hiring and classification duties are covered in more depth in the employment material; check uscis.gov for the Form I-9 rules and dol.gov and irs.gov for classification tests.
Frequently asked questions
How much does it cost to form an LLC?
It varies significantly by state, and some states also charge an ongoing annual or biennial fee or franchise tax. There's no single national number — check your Secretary of State's website for your state's current fee before you file.
Do I need a lawyer to form an LLC?
Most people file it themselves; it's designed to be done without a lawyer. If your business has multiple owners, outside investors, or a complicated structure, though, it's worth having an attorney review or draft your operating agreement. Free help is also available through the SBA, SCORE, and your local Small Business Development Center.
Does forming an LLC automatically lower my taxes?
No. An LLC has no tax status of its own — a single-member LLC is taxed like a sole proprietorship and a multi-member LLC like a partnership by default, unless you elect corporate taxation. Forming an LLC changes your liability exposure, not your tax bill, by itself.
Can I be my own registered agent?
In most states, yes, as long as you have a physical street address (not a P.O. box) in the state and are available there during business hours. Some owners prefer a registered agent service instead, for privacy or to avoid a process server showing up unannounced at home.
What happens if I miss my state's annual report?
Consequences vary by state but can include late fees and, eventually, administrative dissolution of your LLC — ending its legal existence and the liability protection that came with it. Check your Secretary of State's site for your deadline and reinstatement process if you've already missed one.
This article provides general business information, not legal, tax, or financial advice, and does not create an attorney-client or accountant-client relationship. For guidance specific to your situation, consult a licensed attorney or CPA, or contact your state's Secretary of State office, the IRS, the SBA, or a local Small Business Development Center.
Frequently asked questions
How much does it cost to form an LLC?
It varies significantly by state, and some states also charge an ongoing annual or biennial fee or franchise tax. There's no single national number — check your Secretary of State's website for your state's current fee before you file.
Do I need a lawyer to form an LLC?
Most people file it themselves; it's designed to be done without a lawyer. If your business has multiple owners, outside investors, or a complicated structure, though, it's worth having an attorney review or draft your operating agreement. Free help is also available through the SBA, SCORE, and your local Small Business Development Center.
Does forming an LLC automatically lower my taxes?
No. An LLC has no tax status of its own — a single-member LLC is taxed like a sole proprietorship and a multi-member LLC like a partnership by default, unless you elect corporate taxation. Forming an LLC changes your liability exposure, not your tax bill, by itself.
Can I be my own registered agent?
In most states, yes, as long as you have a physical street address (not a P.O. box) in the state and are available there during business hours. Some owners prefer a registered agent service instead, for privacy or to avoid a process server showing up unannounced at home.
What happens if I miss my state's annual report?
Consequences vary by state but can include late fees and, eventually, administrative dissolution of your LLC — ending its legal existence and the liability protection that came with it. Check your Secretary of State's site for your deadline and reinstatement process if you've already missed one.
This article is general legal information, not legal advice, and may not reflect the most current law or the law in your jurisdiction. Laws vary by state and change over time. For advice about your specific situation, consult a licensed attorney.
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