A limited liability company (LLC) is the most common way small businesses and solo founders set up a legal entity in the United States. Forming one is mostly paperwork, but the choices you make before you file, and the tasks you complete afterward, matter more than the filing itself. This guide walks through the whole process in the order it usually happens, with notes on where state rules differ.
What an LLC is, and what it is not
An LLC is a business entity created under state law. Its owners are called members. Once the state accepts your formation document, the LLC exists as a separate legal person: it can sign contracts, open accounts, and own property in its own name.
Two features explain why founders choose it:
- Limited liability. In most instances, the members' personal assets are protected from the company's debts and lawsuits. The protection is not absolute: it can be lost if you mix personal and business money, ignore formalities your state requires, or personally guarantee a loan.
- Flexible federal taxation. The IRS does not have a separate "LLC" tax category. By default, a single-member LLC is disregarded as separate from its owner for income tax purposes, and an LLC with two or more members is treated as a partnership. An LLC can instead elect to be taxed as a corporation by filing Form 8832, and an eligible LLC can elect S corporation treatment with Form 2553.
What an LLC is not: it is not a tax status, it is not a license to operate in a regulated industry, and it does not give its owners any US immigration status.
Decisions to make before you file
Choose your state
You can form an LLC in any state, regardless of where you live. The state you choose becomes your LLC's "home" state, and its law governs the company. If you then do business in other states, you may need to register there as a foreign LLC (a process often called foreign qualification), which means extra fees and filings.
A practical rule: if you have a physical presence, employees or an office in one US state, forming there is usually simplest. If you have no US presence, founders often compare a few states on ongoing cost and simplicity.
| Consideration | What to compare |
|---|---|
| Filing fee | One-time state fee to form the LLC (see state fees) |
| Ongoing state costs | Annual report fees, annual taxes or minimum franchise taxes |
| Where you operate | Whether you will need to register in another state anyway |
| Privacy | What the public record shows about members and managers |
| Banking and partners | Whether the people you work with ask for a particular state |
Ongoing costs vary a lot. As of October 2026, for example, Delaware's Division of Corporations lists an annual tax of $400 for LLCs, due by June 1, with no annual report required. Wyoming charges an annual report license tax of $60 or a small percentage of in-state assets, whichever is greater. California charges most LLCs an $800 annual tax through its Franchise Tax Board. Always check the current amounts with the state before you decide.
Choose a name
Every state has naming rules. In general, the name must:
- Include a designator such as "Limited Liability Company", "LLC" or "L.L.C."
- Be distinguishable from names already on file with that state
- Avoid restricted words (such as "Bank" or "Insurance") unless you have approval from the relevant regulator
Search the state's business entity database before you file. A name that looks available is not guaranteed to be accepted, because the state makes the final call when it reviews your filing. A state registration also does not give you trademark rights, so consider a separate trademark search if the brand matters to you.
Decide how the LLC will be managed
Most states let you pick one of two structures:
- Member-managed: the owners run the business day to day. This is common for solo founders and small teams.
- Manager-managed: one or more managers (who may or may not be members) run the business, and other members are passive owners. This can suit companies with investors who do not want an operating role.
Line up a registered agent
Every LLC needs a registered agent with a physical street address in its home state. The agent receives lawsuits and official state notices on the company's behalf. If you do not live in the state, you will generally use a commercial registered agent. Our registered agent guide covers the details.
Step by step: forming the LLC
1. Prepare the formation document
The document has different names depending on the state: articles of organization in many states, a certificate of formation in others, including Delaware. It is usually short. Expect to provide:
- The LLC's name
- The registered agent's name and in-state address
- A principal office or mailing address (rules vary by state)
- The names of organizers, and sometimes members or managers
- The management structure, if the state asks for it
2. File with the state and pay the filing fee
You file with the state's business filing office, often the Secretary of State. The state filing fee is set by each state and is paid by you, whether you file yourself or use a service. Some states also offer optional expedited processing for an extra state fee.
3. Wait for state review
The state reviews the filing and either approves it or rejects it with a reason, such as a name conflict or missing information. Processing time varies by state and by season, from same-day in some states to several weeks in others. Nobody outside the state office can promise a fixed date.
4. Adopt an operating agreement
An operating agreement sets out ownership percentages, voting, how profits are shared, what happens if a member leaves, and how the company can be dissolved. Few states require you to file it, but some expect every LLC to have one, and banks often ask to see it. Even a single-member LLC benefits from a written agreement, because it helps show the company is separate from you.
5. Get an EIN from the IRS
An Employer Identification Number (EIN) is the company's federal tax ID. You will typically need one to open a business bank account, hire employees, and file federal returns. The EIN is free from the IRS. If the responsible party has an SSN or ITIN, the IRS online application is usually the fastest route; international applicants without either generally apply by fax, mail, or the IRS international phone line. Our EIN guide for international founders explains each option.
6. Handle state and local registrations
Depending on what you do and where, you may need:
- A state sales tax permit if you sell taxable goods or services
- State payroll registrations if you hire employees
- City or county business licenses
- Professional or industry licenses for regulated activities
A few states also require extra post-formation steps for new LLCs, such as publishing a notice of formation in local newspapers. Check your state's requirements once your filing is approved.
7. Open a business bank account
Keeping business money separate from personal money is one of the most important habits for preserving liability protection. Banks usually ask for your formation document, EIN, operating agreement and identity documents. Each bank decides independently whether to open an account, so no formation service can guarantee approval.
What forming an LLC costs
| Cost | Who sets it | When you pay |
|---|---|---|
| State filing fee | The state | When you file |
| Registered agent service | The agent you choose | Yearly, unless you act as your own agent |
| EIN | The IRS (no fee) | Not applicable |
| Annual report or annual tax | The state | Yearly or every two years, depending on the state |
| Optional services (address, bookkeeping, compliance) | The provider | Only if you choose them |
With Firmlane, eligible standard LLC formations carry a $0 Firmlane service fee. You still pay the state filing fee, which we show separately before you pay. EIN assistance is included on eligible orders at no Firmlane fee, and the first year of registered agent service is included on eligible orders, with the renewal price shown upfront. See pricing for what is and is not included.
How long it takes
Formation time depends almost entirely on the state's processing queue, plus the time it takes you to provide accurate information. EIN timing depends on the IRS and the method used: according to the IRS, fax applications generally receive an EIN in about four business days and mailed applications take about four weeks, and processing can be slower during high-volume periods. Plan your launch around ranges for the state step. With Firmlane, EIN assistance comes with our guaranteed ein within 4 weeks: the 4 weeks start once your company has been approved by the state and we have your complete EIN information. If your EIN is not delivered within 4 weeks, we keep working on it at no cost and refund every Firmlane fee you paid on the order, or $100, whichever is more.
After formation: keeping the LLC in good standing
Forming the LLC is the start, not the finish. Most states require an annual or biennial report and some charge annual taxes. Missing these can lead to late penalties, loss of good standing, and eventually administrative dissolution. Our guide to annual reports and good standing covers the details.
Federal obligations depend on how the LLC is taxed and who owns it. Two points worth knowing:
- Foreign-owned single-member LLCs generally must file Form 5472 with a pro forma Form 1120 each year, even with no income. The IRS penalty for failing to file Form 5472 is $25,000.
- Beneficial ownership reporting: FinCEN's March 2025 interim final rule exempted companies created in the United States from beneficial ownership information (BOI) reporting, and FinCEN made that exemption permanent in a final rule announced on August 11, 2026. Companies formed under foreign law and registered to do business in a US state may still have reporting obligations.
Common mistakes to avoid
- Picking a state only for its reputation. If you operate somewhere else, you may pay for two states.
- Skipping the operating agreement. It prevents disputes and supports your liability protection.
- Mixing personal and business money. Use a separate account from day one.
- Ignoring the calendar. Annual reports, state taxes and federal filings have fixed deadlines.
- Assuming the formation service handles taxes. Formation and tax filing are different services. Ask a qualified tax professional about your situation.
Next steps
- Ready to file? Start your LLC and review every charge before you pay.
- Compare what is included on our LLC formation page and pricing page.
- Check the state filing fees for the states you are considering.
- Forming from outside the US? Read the international founders guide, or our guide for Indian founders.
- Still deciding on entity type? See LLC vs C corporation, or contact us with questions about our process.
Sources
- IRS: Limited liability company (LLC) (opens in a new tab)
- IRS: Employer identification number (opens in a new tab)
- SBA: Register your business (opens in a new tab)
- SBA: Choose a business structure (opens in a new tab)
- Delaware Division of Corporations: LLC/LP/GP tax instructions (opens in a new tab)
- Wyoming Secretary of State: Business FAQs (opens in a new tab)
- California Franchise Tax Board: Limited liability company (opens in a new tab)
- IRS: Instructions for Form 5472 (opens in a new tab)
- FinCEN: Beneficial ownership information reporting (opens in a new tab)
Last reviewed: 2026-10-17.