Starting your own business is exciting, but it also comes with legal and financial responsibilities. If you’re serious about protecting your personal assets while enjoying flexibility in how you run and tax your business, forming a Limited Liability Company (LLC) might be your best option.
An LLC provides the legal structure many entrepreneurs need to grow confidently and legally. Whether you’re a freelancer, small business owner, or launching a new startup, this guide walks you through everything you need to know to form an LLC in the United States in 2025.
What Is an LLC?
A Limited Liability Company, commonly known as an LLC, is a legal business entity in the United States that protects its owners—called “members”—from being personally liable for the company’s debts or legal obligations. In simpler terms, if your LLC gets sued or falls into debt, your personal assets such as your house, car, and savings account usually cannot be touched.
LLCs are considered a hybrid structure because they combine the operational flexibility and pass-through taxation of a sole proprietorship or partnership with the limited liability protection of a corporation. This unique combination makes them extremely popular with small business owners.
Why Should You Start an LLC?
There are many reasons to consider forming an LLC. The most important one is liability protection. If you run your business as a sole proprietorship and something goes wrong, you could lose your personal property. An LLC shields your personal assets from business-related lawsuits and debts.
In addition to liability protection, an LLC offers flexible tax options. By default, LLCs are pass-through entities, meaning profits and losses go directly to your personal tax return. However, you also have the option to elect for S-Corp taxation, which can help reduce self-employment taxes in certain situations.
LLCs also give your business credibility. Clients, vendors, and investors tend to take you more seriously when you have “LLC” after your business name. Plus, with fewer formalities than a corporation, an LLC is easier to manage while still giving you a professional and legal edge.
Step-by-Step Guide to Starting an LLC
Starting an LLC is a fairly straightforward process, but each step is important to make sure your business is compliant and legally protected.
1. Choose the State Where You Want to Form Your LLC
The first decision you need to make is where to form your LLC. Most people choose their home state, and that’s usually the best option if you’re operating locally. However, some business owners register in states like Delaware, Nevada, or Wyoming due to their business-friendly laws, lower fees, and privacy benefits.
Be cautious, though—if your business is physically located in another state, you may need to register as a “foreign LLC” in your home state, which increases your paperwork and costs. For most small business owners, it’s easier and cheaper to form the LLC in the state where the business is actually located.
2. Pick a Name for Your LLC
Choosing a business name is a big step, and there are legal rules to follow. Your LLC name must be unique in your state and must end with a designator like “LLC,” “L.L.C.,” or “Limited Liability Company.”
Before deciding, check your state’s business name database to ensure the name you want is available. You should also check domain name availability if you plan to launch a website. Ideally, your business name and domain name should match.
Avoid using restricted words like “bank,” “insurance,” or “university” unless you have special approval. These names may also be subject to additional licensing or regulatory requirements.
3. Designate a Registered Agent
Every LLC is required to have a registered agent, which is a person or company designated to receive legal papers, tax documents, and official notices on behalf of your business.
The registered agent must have a physical address in the state where your LLC is formed and must be available during normal business hours. You can serve as your own registered agent, but most business owners choose a registered agent service for convenience and privacy. This service usually costs between $100 and $300 annually.
4. File Articles of Organization
This is the official paperwork that legally creates your LLC. It’s filed with the Secretary of State’s office (or equivalent agency in your state). The document is often called the “Articles of Organization” but may also be referred to as a “Certificate of Formation” or “Certificate of Organization.”
The filing typically includes:
- Your LLC’s name
- Business address
- Registered agent’s name and address
- Names of LLC members or managers
- Business purpose (often just “any lawful business”)
Filing fees vary depending on the state and can range from $40 to $500. Once approved, your LLC is officially formed.
5. Create an Operating Agreement
Although not required in all states, an Operating Agreement is a crucial internal document that outlines the structure, ownership, and operational rules of your LLC. It helps prevent conflicts among members and gives your business more legitimacy in the eyes of banks, courts, and investors.
Your Operating Agreement should cover:
- Ownership percentages
- Roles and responsibilities
- How profits and losses are shared
- Voting rights
- Rules for adding or removing members
- What happens if someone wants to leave the LLC
Even if you’re a single-member LLC, having an Operating Agreement on file is highly recommended.
6. Get an EIN from the IRS
An Employer Identification Number (EIN) is essentially a Social Security Number for your business. It’s required to:
- Open a business bank account
- File federal and state taxes
- Hire employees
You can obtain an EIN for free by visiting the IRS website. The application takes just a few minutes and is usually processed instantly.
7. Open a Business Bank Account
Once you’ve received your EIN, it’s time to open a dedicated business bank account. This is important for several reasons:
- It helps you separate personal and business finances
- Makes tax preparation easier
- Builds credibility with clients and vendors
- Strengthens your LLC’s liability protection
Many banks will require your EIN, Articles of Organization, and possibly your Operating Agreement to open a business account.
8. Apply for Business Licenses and Permits
Your LLC may need one or more business licenses or permits depending on your location and industry. This could include:
- A general business license from your city or county
- A sales tax permit
- Zoning permits
- Health department licenses
Check with your state and local government agencies to ensure you’re fully compliant. Some licenses need to be renewed annually.
9. File for State Taxes (If Required)
Depending on where your LLC operates, you may need to register for state-level taxes, such as:
- Sales tax
- Franchise tax
- State income tax (for certain LLCs)
- Employment tax (if you have employees)
Not all states have the same rules, so check with your state’s Department of Revenue or consult an accountant.
10. Maintain Compliance
After forming your LLC, there are ongoing legal requirements to keep your business in good standing. These include:
- Filing annual or biennial reports with your state
- Paying state fees or franchise taxes
- Keeping detailed records and meeting minutes
- Renewing licenses and permits regularly
Some states have severe penalties or may even dissolve your LLC if you fail to stay compliant.
How Much Does It Cost to Start an LLC?
The total cost to start an LLC varies depending on your state and the services you use. Here’s a rough breakdown:
- State filing fees: $40–$500
- Registered agent: $100–$300 per year
- Operating Agreement template: $0–$100 (DIY or professional)
- EIN: Free from the IRS
- Business license: Varies by city/county
- Annual compliance costs: $50–$300 per year
Using a professional LLC formation service may add another $0–$300 depending on the provider and package.
Can You Start an LLC by Yourself?
Absolutely. Many entrepreneurs form LLCs on their own using their state’s official website. This DIY route is cost-effective but requires you to understand and manage all paperwork and compliance responsibilities.
Alternatively, you can hire a professional service such as ZenBusiness, Incfile, Northwest Registered Agent, or LegalZoom, which handle all the paperwork for you. This can save you time and ensure everything is filed correctly.
Final Thoughts
Starting an LLC is one of the smartest steps you can take to protect your personal assets, gain professional credibility, and manage taxes more efficiently. While it involves a few steps—choosing a name, designating a registered agent, filing with your state, and staying compliant—the process is manageable whether you do it yourself or use a service.
Once your LLC is formed, you’ll have a solid legal foundation to grow your business with confidence. Just remember to stay on top of annual reports, taxes, and recordkeeping. That way, you can focus on what matters most: building your brand, serving your customers, and turning your vision into reality.
FAQS
1. What is the main benefit of forming an LLC?
The main benefit of forming an LLC is personal liability protection. It separates your personal assets from your business debts, so if your company is sued or can’t pay its bills, your personal property like your car or house stays safe. It also provides flexibility in how you’re taxed and is easier to manage than a corporation. That’s why many entrepreneurs choose an LLC when starting a new business.
2. How much does it cost to start an LLC?
The cost to start an LLC depends on the state you’re filing in. Most states charge a filing fee ranging from $40 to $500, and you may also need to pay for additional services like a registered agent or legal help. In total, starting an LLC typically costs between $100 and $800. Keep in mind, there may be annual renewal fees or reports required as well.
3. Do I need a lawyer to form an LLC?
You don’t legally need a lawyer to start an LLC, and many people file on their own through the state’s website. However, if you’re unsure about the paperwork or legal terms, hiring a lawyer or using an online service can make the process easier and prevent mistakes. While it adds cost, professional help can save time and stress. It’s about what level of support you’re comfortable with.
4. Can I form an LLC in a different state from where I live?
Yes, you can form an LLC in a different state, and many people choose states like Delaware or Wyoming for tax or privacy advantages. However, if you do business in your home state, you may still have to register there as a foreign LLC and pay additional fees. Managing an out-of-state LLC can get complicated and expensive. In most cases, it’s best to form your LLC where you operate.
5. What’s a registered agent, and why do I need one?
A registered agent is a person or company that accepts legal documents on behalf of your LLC. This includes official mail like tax notices or lawsuits, and they must have a physical address in the state where your LLC is formed. You can be your own registered agent, but many people hire a service for convenience and privacy. Having one is required in every U.S. state.
6. Do I need an Operating Agreement for my LLC?
An Operating Agreement isn’t required in every state, but it’s highly recommended—even for single-member LLCs. It outlines how your business will run, how profits are shared, and what happens if someone leaves the company. This document can prevent misunderstandings between members and help prove your LLC is a separate legal entity. It adds professionalism and protects your business structure.
7. What taxes does an LLC have to pay?
By default, an LLC is a pass-through entity, meaning the profits go directly to the owners’ personal tax returns. This helps avoid double taxation, but you still need to pay self-employment taxes and possibly state taxes, depending on your location. You can also choose to be taxed as an S Corp or C Corp if it benefits you financially. Talking to an accountant can help you decide the best option.
8. Can I change the name of my LLC later?
Yes, you can change your LLC’s name by filing an amendment with your state’s business filing agency. This usually involves a small fee and updated paperwork, including checking that your new name is available and doesn’t conflict with another business. After the name change, you’ll need to update it on bank accounts, licenses, and contracts. It’s a simple but important step if you’re rebranding.
9. How long does it take to form an LLC?
The time it takes to form an LLC varies by state, but most process applications within one to three weeks. Some states offer expedited processing for an extra fee, which can reduce the time to a few business days. If you use an online service, they’ll often speed things up by handling paperwork and filing for you. Once approved, you’ll receive confirmation documents to make it official.
10. What should I do after I’ve formed my LLC?
After forming your LLC, you should get an EIN (Employer Identification Number) from the IRS, open a business bank account, and apply for any necessary licenses or permits. You’ll also want to create a bookkeeping system to track income and expenses. Don’t forget to file annual reports or renewal documents to keep your LLC in good standing. These steps help separate your personal and business finances.