How to start an LLC in 2026 — the step-by-step guide

What is an LLC?

An LLC — a Limited Liability Company — is a US state-level business entity that gives you two things at once: limited personal liability (your house, car, and personal accounts are legally separate from the business) and pass-through taxation (profits flow to your personal tax return instead of being taxed twice like a C-Corp). It's the most popular small-business structure in the United States, used by everyone from solo freelancers to nine-figure operating businesses and real-estate holding companies.

The LLC is created by filing a single document — usually called Articles of Organization or Certificate of Formation — with one state's Secretary of State (or equivalent). Once the state stamps that document, the LLC legally exists. Everything else (EIN, bank account, operating agreement) builds on top of it.

Two important things to set expectations: an LLC is not a federal entity. There is no "US LLC" filed at the federal level — it's a 50-state product. And an LLC does not automatically give you a tax classification — you can be taxed as a sole proprietorship, partnership, S-Corp, or C-Corp depending on what you elect. The IRS calls this the "default rule": one owner = sole prop, two+ owners = partnership, unless you file Form 2553 or 8832 to elect otherwise.

Pros and cons of starting an LLC

An LLC is the default recommendation for most new businesses because the upside is broad and the downside is mostly a modest state fee. Here is the honest trade-off:

Types of LLCs

"LLC" is one legal form with several common flavors. The state filing is usually the same; what changes is ownership, industry rules, and tax elections:

• Single-member LLC — one owner; taxed as a disregarded entity by default. See single-member LLC guide.
• Multi-member LLC — two or more owners; taxed as a partnership by default (Form 1065 + K-1s). See multi-member LLC guide.
• Manager-managed LLC — designated managers run operations; common with passive investors.
• Series LLC — parent LLC with internal compartments, each with separate liability (limited states). See series LLC guide.
• Professional LLC (PLLC) — for licensed professionals (lawyers, doctors, accountants) in states that require it.
• Anonymous / privacy LLC — Wyoming, New Mexico, Delaware, and Nevada limit public owner disclosure. See anonymous LLC guide.
• Foreign-owned LLC — owned by non-US residents; same formation steps plus Form 5472 annually. See LLC for non-US residents.
• S-Corp–taxed LLC — not a separate entity; an LLC that files Form 2553 to reduce self-employment tax once profits are high enough. See S-Corp vs LLC.

How LLCs compare to sole proprietorships and corporations

Most founders choose among three structures at formation time. The LLC sits in the middle — more protection than a sole proprietorship, less bureaucracy than a C-Corp:

Deeper dives: LLC vs sole proprietorship · LLC vs C-Corp · LLC vs corporation

The 7 steps to start an LLC

Every state uses slightly different form names, but the sequence is the same nationwide. Steps 1–4 create the entity; steps 5–7 make it operational for banking and taxes; step 8 is ongoing compliance.

Step 1 — Pick the state you'll form in

This is the single most consequential decision, and most founders overcomplicate it. The rule of thumb:

• If you live in the US and operate locally (clients, employees, office, inventory in your home state), form in your home state. Forming out-of-state means you'll have to foreign-qualify back into your home state anyway, which means paying two filing fees, two registered agents, and two annual reports forever.
• If your business is online-only with no physical state nexus, Wyoming and Delaware are the two defaults. Wyoming wins on cost ($60/yr) and privacy. Delaware wins on investor familiarity if you plan to raise venture capital.
• If you're a non-US founder, Wyoming is the default starter. New Mexico is the cheapest serious alternative ($50 to form, no annual fee at all). Delaware only if US VCs are on the roadmap.

See our best state for an LLC guide and the head-to-head comparisons for Wyoming vs Delaware and Wyoming vs New Mexico.

Step 2 — Choose a name that meets your state's rules

The name has to satisfy three things:

1. Include a required designator. Most states require "LLC", "L.L.C.", or "Limited Liability Company" at the end. A handful of states (e.g., Louisiana) allow "L.C." or "Limited Company".
2. Be distinguishable on the state's record. If "Acme Logistics LLC" is already on file in Texas, you cannot file "Acme Logistics LLC" or even "Acme Logistics, LLC" — punctuation and entity-type words don't count toward distinguishability.
3. Avoid restricted words. "Bank", "Insurance", "University", "Trust", and similar terms typically require additional approvals from a banking/insurance/education regulator before the Secretary of State will accept them.

Run a free entity search on your state's Secretary of State website before filing — our LLC lookup guide walks through every state's registry. Want to lock the name without filing yet? Most states let you file a name reservation for $10–$50 that holds it for 60–120 days.

Step 3 — Appoint a registered agent

Every US LLC must designate a registered agent (sometimes called a "statutory agent" or "agent for service of process") — a person or company with a physical street address in the formation state who can accept legal mail during business hours. This isn't optional, and it's not a check-the-box detail: if you get sued and the registered agent can't be found, you can lose by default judgment without ever seeing the complaint.

You have three options:

• Be your own agent — free, but only viable if you live in the formation state, have a physical address there (no PO boxes), and don't mind your home address appearing on the public record.
• Use a friend or family member — possible but fragile; if they move or stop being reachable, you have to file a change of agent with the state and risk falling out of good standing.
• Use a commercial registered agent — typically $100–$200/year. Required if you're a non-US founder or operate out-of-state. Registered agent service is included free in every ClearFormation plan.

Step 4 — File Articles of Organization

This is the filing that actually creates the LLC. The form asks for:

• LLC name (must end in the required designator)
• Principal office address
• Registered agent name and address
• Management structure (member-managed or manager-managed)
• Organizer name and signature (the person filing — can be you or your formation service)
• Duration (almost always "perpetual")

Some states (New York, Nebraska, Arizona) add a publication requirement — you have to publish notice of the LLC's formation in one or more local newspapers, which can cost anywhere from $40 (rural Nebraska) to $1,500+ (NYC counties). Factor this in before picking a state.

Member-managed vs manager-managed

Every state asks whether your LLC is member-managed or manager-managed on the Articles of Organization. This is not cosmetic — it defines who can bind the company in contracts and who appears on public filings in some states.

• Member-managed (default for most founders): All members share authority to sign contracts, open bank accounts, and make operational decisions. Best for solo founders and small partnerships where everyone is actively involved.
• Manager-managed: One or more designated managers run the LLC; members who are passive investors do not appear as operators. Best when you have silent partners, family investors, or want to separate ownership from day-to-day control.

You can change the structure later with an amendment and an updated operating agreement, but getting it right at formation avoids bank onboarding headaches — many banks ask who has signing authority and cross-check against your Articles.

Step 5 — Get your EIN from the IRS

The Employer Identification Number is the LLC's federal tax ID — required to open a US business bank account, hire employees, file federal taxes, or accept payments through Stripe / PayPal / Square business accounts. EINs are free from the IRS; the only cost is the time it takes to file Form SS-4 correctly.

• US founders with an SSN/ITIN — apply through the IRS online portal at irs.gov. The EIN issues immediately on a successful submission. The portal is open Monday–Friday, 7am–10pm ET.
• Non-US founders without an SSN — file Form SS-4 by fax to the IRS International EIN Operation: +1 (304) 707-9471 from outside the US, or +1 (855) 215-1627 from within the US. Write "Foreign" on line 7b. Typical turnaround is ~4 business days; mail takes 4–8 weeks. Full walkthrough in our EIN without an SSN guide.

Step 6 — Draft an operating agreement

The operating agreement is the internal rulebook for the LLC — who owns what percentage, who can sign contracts, how profits are distributed, what happens if a member dies or wants out. Only a few states (California, Delaware, Maine, Missouri, Nebraska, New York) legally require one, but you should have one regardless of state for two practical reasons:

1. Banks ask for it. Mercury, Relay, Chase, BofA — all of them request the operating agreement as part of business account onboarding for multi-member LLCs, and increasingly for single-member ones too.
2. It reinforces your liability shield. Courts use the operating agreement as evidence that the LLC is a real, separate entity — not just your personal alter ego. Single-member LLCs that get "pierced" (liability shield broken) almost always lack one.

See our operating agreement guide for a template and the clauses every founder should include.

Step 7 — Open a US business bank account

Mixing LLC money with personal money is the fastest way to lose your liability shield. Open a dedicated business checking account before you take your first dollar.

The options depend on whether you're physically in the US:

• In-person US founders — Chase, Bank of America, US Bank, local credit unions. Bring the EIN letter (CP 575), your Articles of Organization, your operating agreement, and a government ID. Most accounts open same-day.
• Remote / non-US founders — Mercury, Relay, Wise Business, and Brex (with restrictions) all open fully online with no US visit required. Mercury and Relay are the most non-resident-friendly. Stripe Atlas-style alternatives like doola/Globalfy bundle banking with formation but tend to cost more long-term.

Full breakdown in our business bank account for LLC guide, including what each bank requires and which ones reject non-residents.

Step 8 — Stay compliant

The work doesn't end at formation. Every LLC has three recurring obligations:

1. State annual or biennial report. Most states require a short report and fee every 1–2 years. Range: $0 (Idaho, Mississippi, Minnesota) to $500 (Massachusetts). Miss it and the state administratively dissolves the LLC — and your liability shield disappears with it. See our annual report filing service.
2. Federal tax return. Single-member LLCs report on Schedule C of the owner's 1040. Multi-member LLCs file Form 1065 + issue K-1s. S-Corp-elected LLCs file Form 1120-S. Due dates: March 15 (1065, 1120-S) or April 15 (1040).
3. FinCEN BOI report. Domestic US LLCs are exempt as of FinCEN's March 2025 interim final rule — only foreign reporting companies still file. Read our BOI filing guide.

Comply with tax and regulatory requirements

Formation creates the entity; compliance keeps it alive and preserves your liability shield. Beyond the annual report, most LLCs touch at least one of these:

• Federal income tax. Single-member LLCs add Schedule C to Form 1040. Multi-member LLCs file Form 1065 and issue K-1s. S-Corp–elected LLCs run payroll and file Form 1120-S.
• Self-employment tax. Active members owe 15.3% on their share of LLC profits unless S-Corp payroll splits salary and distributions.
• State income and franchise tax. California ($800 minimum), Delaware ($300 LLC tax), Texas franchise tax above revenue thresholds, and others — see do LLCs pay taxes.
• Sales tax permits. Required if you sell taxable goods or certain services — register with the state comptroller or revenue department.
• Payroll accounts. If you hire W-2 employees, register as an employer in each state where they work.
• Business licenses. City, county, or industry permits (contracting, food, childcare, finance) are separate from the LLC filing.
• 1099 reporting. Issue 1099-NEC to US contractors paid $600+ for services; collect W-9s first.

Do you need an attorney to form an LLC?

For a standard single-founder or small-partnership LLC, no. Formation is an administrative state filing — not a courtroom procedure. Millions of founders file online every year without counsel. ClearFormation and similar services handle Articles, registered agent, and EIN for a flat fee.

Hire a business attorney when any of these apply: custom equity splits with vesting cliffs or liquidation preferences, regulated industries (healthcare, securities, cannabis, insurance), complex international ownership chains, converting an existing business into an LLC with assets and contracts to assign, or raising institutional capital that requires bespoke governance documents.

Hire a CPA (not necessarily a lawyer) when: you're a non-US owner who needs Form 5472, you're electing S-Corp status, you have multi-state nexus, or you're unsure whether your activity creates US effectively-connected income.

What to do after you form your LLC

State approval is the halfway point, not the finish line. Most founders who stall do so between formation and banking — here is the post-formation checklist in order:

1. Download stamped Articles. Save the PDF the state emails or hosts in your portal — banks and payment processors request it.
2. Get your EIN. Apply within days of approval. Non-US founders fax Form SS-4; US founders use the IRS online tool.
3. Sign the operating agreement. Even single-member LLCs should have one — banks and liability protection both depend on it.
4. Open a business bank account. Do not use your personal account. Mercury, Relay, Chase, and others each have different document requirements — see our bank account guide.
5. Register for state taxes if required. Sales tax permit if you sell taxable goods, payroll accounts if you hire, state income tax withholding where applicable.
6. Get local business licenses. City and county permits are separate from the LLC filing — contractors, food service, and childcare almost always need them.
7. Foreign-qualify if you operate in another state. If you formed in Wyoming but have employees or an office in Texas, register the LLC in Texas as a foreign LLC.
8. Calendar your annual report. Set a reminder 30 days before the due date. Missed reports trigger administrative dissolution. Banks sometimes also request a certificate of good standing before large contracts.

Need help with foreign qualification? See our foreign qualification service.

How much does it cost to start an LLC?

The all-in first-year cost for a typical LLC breaks down roughly like this:

• State filing fee: $35 (Montana) – $500 (Massachusetts). Most states $50–$200.
• Registered agent: $0 if you're your own agent, $100–$200/yr commercial. Included in ClearFormation plans.
• EIN: $0 from the IRS directly. ~$50–$150 if you use a service to file SS-4 for you (especially common for non-US founders).
• Operating agreement: $0 with a template, $200–$1,500 with a lawyer for custom multi-member terms.
• BOI report: $0 — domestic US LLCs no longer file after March 2025.
• Publication (NY, NE, AZ only): $40–$1,500+ depending on county.

Most founders land between $100 and $400 for the first year. See the full LLC cost breakdown.

How long it takes

State processing is the long pole. Some of the fastest right now:

• Colorado

  Immediate (online)
• Delaware

  1-3 business days
• Indiana

  1 business day online
• Iowa

  1-2 business days online
• Kansas

  Immediate (online)
• Kentucky

  1-2 business days

See the full state-by-state processing time table.

Common mistakes that delay or wreck the filing

• Picking the wrong state

  Forming in Wyoming or Delaware because of online advice when you operate locally in another state. You'll end up paying double — once in the formation state, once in your home state via foreign qualification.

• Name not actually available

  Skipping the entity search and getting the filing kicked back. Distinguishability isn't just about exact match — punctuation, entity-type words, and 'a/an/the' don't count.

• Using a PO box for the registered agent

  Every state requires a physical street address for the registered agent. PO boxes get filings rejected.

• Filing the LLC but skipping the EIN

  The LLC exists, but you can't bank, can't get paid commercially, and can't file taxes properly. Get the EIN within days of the state approval.

• Mixing personal and business money

  The fastest way to lose your liability shield. Open the business account before the first dollar moves.

• Outdated BOI advice

  Many guides still tell US-formed LLCs to file BOI within 30 days. That requirement was removed for domestic entities by FinCEN's March 21, 2025 interim final rule.

• Forgetting the annual report

  States administratively dissolve LLCs that miss their annual report — and reviving the LLC after dissolution costs more than years of compliance combined.

For non-US founders

Every step above applies to you identically, with three tweaks:

1. You almost certainly want a commercial registered agent because you don't have a US address.
2. You can't use the IRS online EIN tool — file Form SS-4 by fax with "Foreign" on line 7b. See EIN without an SSN.
3. Bank account opening is the bottleneck, not formation. Mercury and Relay open accounts for non-residents online; traditional US banks usually don't without a US visit. See LLC for non-US residents.