How to Start an LLC: Complete Step-by-Step Guide for 2026

What is an LLC and Why Form One?

A Limited Liability Company (LLC) is a business structure that protects your personal assets from business debts and lawsuits. It's the most popular choice for small business owners because it combines the liability protection of a corporation with the tax flexibility of a sole proprietorship.

Benefits of an LLC:

• Personal asset protection — Your house, car, and savings are protected from business lawsuits
• Tax flexibility — Choose how you want to be taxed (sole prop, partnership, S-corp, or C-corp)
• Credibility — Customers and vendors take you more seriously
• Simplicity — Less paperwork and formalities than corporations
• Business credit — Easier to build business credit separate from personal

Step 1: Choose Your State

You can form an LLC in any state, but most people choose either:

• Their home state — Simplest option, no foreign qualification needed
• Wyoming — No state income tax, strong privacy protections, low fees
• Delaware — Business-friendly courts, but more expensive
• Nevada — No state income tax, but higher fees

Our recommendation: If you're a small business operating in one state, form in your home state. The savings from Wyoming or Delaware usually only matter for larger businesses.

Step 2: Choose Your LLC Name

Your LLC name must:

• Include "LLC" or "Limited Liability Company"
• Be unique in your state (search your state's business database)
• Not include restricted words like "Bank" or "Insurance" without proper licensing

Pro tip: Check domain availability before finalizing your name. You want YourBusiness.com to be available.

Step 3: Choose a Registered Agent

A registered agent receives legal documents on behalf of your LLC. Options include:

• Yourself — Free, but your address becomes public record
• A registered agent service — $50-300/year, provides privacy and ensures you don't miss important documents

Step 4: File Articles of Organization

This is the official document that creates your LLC. You'll file it with your state's Secretary of State office. Information required:

• LLC name
• Principal address
• Registered agent name and address
• Member/organizer names (in some states)
• Effective date (usually immediate)

Filing fees vary by state: $50 (Kentucky) to $500 (Massachusetts). Most states are $100-150.

Step 5: Create an Operating Agreement

An Operating Agreement is an internal document that outlines:

• Ownership percentages
• Profit/loss distribution
• Member roles and responsibilities
• Voting rights
• What happens if a member leaves
• Dissolution procedures

Even single-member LLCs should have one — it strengthens your liability protection and is required by banks to open a business account.

Step 6: Get Your EIN (Employer Identification Number)

An EIN is like a Social Security number for your business. You need it to:

• Open a business bank account
• Hire employees
• File business taxes
• Apply for business credit

Get your EIN free from the IRS at irs.gov. It takes about 5 minutes online. Avoid services that charge for this!

Step 7: Open a Business Bank Account

Keeping business and personal finances separate is crucial for maintaining liability protection. You'll need:

• EIN confirmation letter
• Articles of Organization
• Operating Agreement
• Personal ID

Best banks for small business: Mercury, Relay, Bluevine (online), Chase, Bank of America (traditional).

Step 8: Get Business Licenses and Permits

Depending on your business type and location, you may need:

• General business license (city/county level)
• Professional licenses (contractors, real estate, etc.)
• Sales tax permit (if selling physical products)
• Health permits (food businesses)
• Home occupation permit (if working from home)

Step 9: Set Up Accounting and Taxes

From day one, you should:

• Track all income and expenses (QuickBooks, Wave, or spreadsheet)
• Save 25-30% of profits for taxes
• Understand your tax obligations (quarterly estimates if you expect to owe $1,000+)
• Consider hiring a CPA or using tax software

LLC Costs Summary

• State filing fee: $50-500 (one-time)
• Registered agent: $0-300/year
• EIN: Free
• Operating Agreement: Free (DIY) to $500 (attorney)
• Annual report: $0-300/year (varies by state)

Total to start: As low as $50-150 in most states if you do it yourself.