In 2023 alone, American entrepreneurs started a record-breaking 5.5 million small businesses—the lion's share of which were LLCs. This year, experts believe that the upward trajectory will continue, in large part because of how painless it has become to create and register an LLC.
Instead of the overly complex, painfully slow process from decades past, starting an LLC comes down to seven simple steps (and a few extra notes to keep in mind).
Key takeaways
- Form an LLC in only seven steps: Select a unique name, appoint your registered agent, determine your LLC’s management structure, create an operating agreement, and file articles of organization.
- Set your new LLC up for success: Stay compliant with federal and state law, think about taxes early, and build a strong financial structure.
- Compare the benefits of different LLC types: LLCs are popular for several reasons, but which of the eight types is best for you?
The 7 steps of creating an LLC
To create an LLC, you'll need to choose a unique business name, designate a registered agent, determine your management structure, prepare an operating agreement, file articles of organization with your state, obtain an EIN, and secure necessary business licenses and permits. Filing for an LLC online can be done in an afternoon, with approval taking as little as a couple of business days in most states.
Limited liability companies (LLCs) provide business owners with personal liability protection, lower startup costs, and greater flexibility for management and taxes compared to other business structures, making them an attractive choice for many small business owners.
1. Choose your business name
More often than not, your business' name will be the first thing a prospective customer interacts with—and the first chance you have to hook their interest. A unique, memorable, and evocative name can set you apart from competitors, build a strong foundation for future branding efforts, and set your business up for success overall.
Your LLC's name also needs to meet specific legal requirements that vary by state. Most states require that your business name must:
- Be distinguishable from competitors: All states require names to be adequately different from pre-existing companies to prevent customer confusion. Consider a business search through your Secretary of State's website to check for similar names.
- Include a business-type designator: Your official name must include "limited liability company," "LLC," or similar variations, typically placed at the end of your business name.
- Avoid restricted terms: Terms such as "bank" or "insurance" usually require specific pre-approval and proper documentation.
- Respect existing trademarks: Ensure your name doesn't infringe on existing trademarks to avoid potential litigation.
Keep in mind that most states allow you to reserve a name temporarily, even if you aren't yet ready to create your LLC. Simply submit your state's name reservation form and the required filing fee to reserve a name.
2. Designate a registered agent
An LLC's registered agent (also known as a resident agent or statutory agent) must receive legal documents, such as lawsuits and subpoenas, on behalf of your LLC and then deliver them promptly to the appropriate person within your business.
Every state has its own requirements for who can serve as a registered agent, but typically, the registered agent services must be either a state resident over the age of 18 who has a physical address in the state (known as the "registered office''), or a company authorized to provide registered agent services in the state.
In most states, you can act as your own registered agent, designate an employee or other individual as an agent, or hire a registered agent service. This last option may be necessary if:
- Your business doesn't have a physical location in the state where it is formed
- No one is available at your business location during normal business hours
- You run a home-based business and don't want your personal address appearing in public records
3. Determine your LLC's management structure
Before you can move on to creating an LLC operating agreement, you'll need to first determine the structure of your new company. Generally, this comes down to choosing between one of two structures:
- Member-managed LLCs. With a member-managed LLC, all members (also referred to as owners) actively participate in the business's day-to-day operations and decisions. Although possible for larger companies, this structure is far more common among smaller LLCs with owners who prefer to be more hands-on in managing the business' routine operations.
- Manager-managed LLCs. With a manager-managed LLC, owners choose one or more people to operate as managers and handle day-to-day decision-making. Importantly, the chosen managers do not need to be owners or members of the LLC itself. A manager-managed LLC structure is typically better when not all members want to be active or when the LLC is especially large.
Give this decision the time and thought it deserves. Choosing the right structure can have a big impact on operations and significantly affect your business' chances for success.
4. Prepare an LLC operating agreement
A written operating agreement is one of the most important documents for any LLC. In it, you and any partners you may have will outline your LLC's operational and financial guidelines, details about the business' structure, ownership interests, and how profits will be divided.
Even in states where such an agreement isn't legally required, it is strongly advised that you take the time to draft a thorough, fair operating agreement that fully explains to each member what to expect from the LLC going forward. By doing so, you can:
- Avoid potential conflicts among members
- Provide an additional layer of personal liability protection
- Ensure your LLC operates smoothly
- Safeguard personal assets
Although it's entirely possible for owners of a single-member LLC to create their own operating agreement using a single-member LLC operating agreement template, it's typically best to consult a qualified business attorney when dealing with multi-member LLCs. While this may add a small amount to your LLC's startup cost, it will likely save you time, money, and conflict in the long run.
5. File your articles of organization
Once you've secured your name, registered agent, and operating agreement, you'll need to file your LLC's formation paperwork with your state. This document may be called articles of organization, articles of formation, certificate of information, or statement of information.
Your articles of organization generally must include:
- LLC name
- Business address
- Duration and purpose of the LLC
- Management structure (member-managed or manager-managed)
- Registered agent name and address
- Organizer signature(s)
Many business owners use an online service to streamline LLC formation and ensure documents are correctly submitted. This adds protection, removes confusion, and frees up time for other business tasks.
Most states allow you to file your LLC's articles of organization online. Filing fees typically range from $50 to $200.
Processing time varies by state, although you can expect it to take a few days or weeks. Most states also offer expedited processing for an extra fee. After approval, you'll receive a certificate of formation confirming that your LLC officially exists. You can then announce your new business and move on to operational requirements.
During this period, some states also require you to publish a notice of your LLC formation in a public newspaper after approval but before certification. Each state with this requirement has its own unique rules.
6. Get an EIN and business bank account
Once your LLC is official, you can apply for an employer identification number (EIN) from the Internal Revenue Service. The EIN is a nine-digit number that identifies your business for federal tax purposes—similar to a Social Security number.
EINs have the following characteristics:
- Required for many LLCs. Any LLC with multiple members or employees must have an EIN for hiring, filing taxes, and applying for business licenses.
- Protects personal information. Using an EIN instead of your Social Security number helps protect your privacy.
- Needed for banking:.Most financial institutions require an EIN to open a business bank account.
You can get an employer identification number at no cost on the IRS website or use an EIN service to take care of the paperwork for you.
7. Obtain business licenses and permits
Depending on the type of business you have and where it's located, you may need one or more licenses or permits to operate legally. Below is an overview of some of the more common ones.
- Seller's permit: Required if you sell taxable goods or services in states that charge sales tax. This permit allows you to collect and remit sales tax to the state.
- General business licenses: Some states require all businesses to have an operating license. More commonly, your city or county will likely require a business license to operate locally.
- Industry-specific licenses: Certain industries require special licenses, such as liquor licenses, occupancy permits, or commercial fishing licenses.
- Foreign LLC registration: If your business operates in states other than where you formed your LLC, you must register as a foreign LLC in those states.
- DBA (doing business as): A DBA is only needed if you're doing business under a name different from your legal LLC name. DBA requirements vary by location.
Industry trade associations and local and state government offices are great resources for determining the types of licenses and permits your business may need. Alternatively, working with a business advisor can help ensure that you have everything you need to get your business up and running.
What to do after you create your LLC
Soon after your LLC is officially created, there are some time-sensitive tasks that need attention. While these things aren't technically required to create an LLC, many are necessary to legally operate that LLC, such as filing for the correct permits. Others, such as brushing up on LLC-specific tax law, can save you money and hassle when done correctly.
1. Get LLC-specific tax advice
Tax law is complicated, and it doesn't get any simpler when you start an LLC. Often, properly handling business taxes is one of the biggest challenges a new LLC will face, and improperly handling them can lead to issues such as:
- Penalties and interest. Filing your LLC taxes incorrectly can result in significant IRS penalties and interest charges.
- Unclaimed deductions. LLCs provide opportunity to claim significant deductions for home office space, travel, equipment, and software. Missing them means leaving money on the table.
- Legal costs. Severe tax errors may trigger IRS audits, requiring expensive legal and accounting professionals.
The IRS does not have a specific LLC tax classification. By default, single-member LLCs are classified as sole proprietorships while multi-member LLCs are classified as partnerships, but LLCs can elect to file as an S corp or C corp.
| Tax Classification | Best For | Key Benefits |
|---|---|---|
| Sole proprietorship | Single-member LLCs | Pass-through taxation—profits reported on personal tax returns without business-level taxation |
| Partnership | Multi-member LLCs | Pass-through taxation—each member pays taxes on their share of profits |
| S corporation | Profitable LLCs wanting to reduce self-employment taxes | Exempt from federal income tax; shareholders pay individual taxes; potential self-employment tax savings |
| C corporation | High-growth LLCs seeking investment | Subject to corporate income tax but offers broader tax planning opportunities and benefits |
Consult with a tax professional to determine the most advantageous tax structure for your situation.
2. Maintain compliance and good standing
Once your newly created LLC is up and running, the last thing you need is legal trouble due to non-compliance or overlooked regulations. In order to remain in good standing with state and federal guidelines, make sure to:
- File annual reports
- Pay any fees associated with your LLC
- Stay informed about your state's LLC requirements
- Pay any franchise taxes that may apply to LLC owners
By maintaining compliance and good standing, you protect your personal assets, ensure the legal operation of your business, and reinforce your credibility with clients, customers, and partners—all of which ensure your LLC's long-term success.
3. File your LLC in other states
When you first get an LLC in your home state, you establish what’s known as a “state of formation” or “domestic state,” which is essentially your business’ home base. If you intend to expand into other states later on, however, you’ll need to file as a foreign LLC within those states.
In this context, “expansion” refers to having an office space, store, or employees in another state, and failing to properly register your limited liability company can lead to hefty fines and penalties later on.
To file your LLC in another state, follow these steps:
- Get a certificate of good standing. Before contacting the state into which you hope to expand, get a certificate of good standing from your home state. This is an official form that says your LLC complies with regulations in its state of formation.
- Apply for foreign qualification. Contact the Secretary of State in the new state to complete a foreign qualification application. This application covers your business’s basic information and typically involves paying a fee.
- Appoint another registered agent. Just like you did the first time around, you’ll need to choose a registered agent with a physical address in the new state.
- Check local laws. Even if your business is compliant with the laws of your home state, it might not be with the new one. Double-check the local laws of any state into which you want to expand.
- Prepare annual reports and fees. You’ll need to file annual reports and pay fees for each state in which you register your limited liability company.
The 8 types of LLCs: Choosing the right fit
Different LLC types offer specific advantages depending on your business needs. Here's how the eight main types compare:
| LLC Type | Best For | Key Features |
|---|---|---|
| Domestic LLC | Most businesses | Operates within the state where it was formed; simplest to create and maintain |
| Foreign LLC | Multi-state operations | Operates in a state different from where it was formed; requires registration in each state |
| Professional LLC (PLLC) | Licensed professionals | For doctors, lawyers, accountants; specific laws govern membership requirements |
| Restricted LLC | Estate planning | Cannot distribute profits for 10 years; profits reinvested in the LLC; offers tax advantages |
| Anonymous LLC | Privacy-focused owners | Owner identities not publicly disclosed; uses nominee manager; available in select states |
| Series LLC | Multiple business ventures | Parent LLC with separate sub-LLCs; each has own members, funds, and liabilities; minimizes risk |
| Low-Profit LLC (L3C) | Social enterprises | Hybrid nonprofit/for-profit structure; created for social objectives; can earn limited profits |
| Nonprofit LLC | Charitable organizations | Can earn profits but must reinvest in charitable goals; complex tax requirements |
The pros and cons of starting an LLC
Compared to the other various business structures, creating an LLC offers several advantages and drawbacks. Would-be business owners should weigh their own needs and goals when making the decision on what kind of structure to use.
Pros
- Limited liability protection. An LLC protects members from personal responsibility for business debts and liabilities.
- Tax flexibility. You can choose how your LLC is taxed—as a sole proprietorship, partnership, S corp, or C corp.
- Management options. An LLC allows you to run the business yourself or designate managers, unlike corporations with stricter management requirements.
- Simplicity. An LLC is one of the easiest business structures to create and maintain.
Cons
- Ownership transfer challenges. Multi-member LLCs typically require all members' agreement to transfer ownership.
- Limited lifespan. Some states require LLC dissolution if a member dies or declares bankruptcy.
- Self-employment taxes. Members must pay Medicare and Social Security taxes out of pocket.
- State variation. LLC laws differ significantly by state, creating potential compliance complexities.
Weighing the benefits and drawbacks of forming an LLC is essential for making an informed decision about your business structure. When making the decision for yourself, do your best to predict any potential challenges and opportunities that your new business may encounter.
Creating an LLC with LegalZoom
An experienced business specialist can streamline LLC formation even further. With LegalZoom, the process takes only three steps.
- Complete our LLC questionnaire. Fill out a simple questionnaire in minutes. You can form a new LLC or convert an existing business, and select your desired liability protections.
- We file your documents. We will create and file your articles of organization with the appropriate regulatory agency or department in your state.
- Receive confirmation. Once approved, we send your completed documents and some tips for next steps.
Why 2025 is the year to start an LLC
Between the increasing availability of new technologies and tools and the growing advantages of small, agile business ideas, 2025 is shaping up to be one of the best years in recent history for small business owners.
Fortunately, the barrier to entry for entrepreneurs is lower than ever, and starting an LLC takes little more than a good idea, due diligence, and the right support system. If you've been considering starting an LLC of your own, now is the time to reserve a name, get your articles of organization, and get to work.
FAQs about starting an LLC
What should I consider when choosing a business name?
Ensure your business name is available and distinguishable, complies with state regulations, doesn't conflict with trademarks, has an available domain and social media handles, and is available in states where you plan to expand.
Can I use my personal bank account for my business?
No, experts advise against mixing business and personal finances. Separate accounts protect your personal liability and simplify taxes.
Where should I form my LLC?
Form your LLC in the state where you live and conduct business—it's simplest and generally the least expensive option. Forming elsewhere requires foreign registration, dual registered agents, and annual reports in multiple states.
How does LLC liability protection work?
An LLC is a separate legal entity from its owners, so members generally aren't personally liable for business debts or other members' actions. Members remain liable only for their own negligent conduct and personally guaranteed obligations.
Am I considered self-employed if I start an LLC?
Yes, if your LLC is classified as a sole proprietorship or partnership, you're self-employed and must pay self-employment taxes quarterly. Some profitable LLCs reduce taxes by electing S corp status.
How much does starting an LLC cost?
State filing fees can range from $50–$200, plus potential costs for registered agent services, legal advice, and annual report fees. Total startup costs vary by state and business type.
Is starting an LLC worth it?
Yes, most attorneys recommend LLCs because they provide liability protection at minimal cost. Consult an attorney and tax adviser to determine if an LLC benefits your specific situation.
What are the benefits of a professional registered agent?
A professional registered agent service provides flexibility for time-sensitive notices, privacy protection by using their address in public records, expert legal guidance, and compliance assistance.
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