The LLC formation process

1. 1

   Pick a formation state.

   Form in the state where you actually do business. If you have no US physical nexus, Wyoming, Delaware, and New Mexico are the most common picks for different reasons (privacy, investor familiarity, lowest ongoing cost).

2. 2

   Choose a unique LLC name.

   The name must include 'LLC' or 'Limited Liability Company', be distinguishable from existing entities in the state's database, and avoid restricted words (bank, insurance, university — these need extra approvals).

3. 3

   Appoint a registered agent.

   Every LLC must designate a registered agent with a physical street address in the formation state, available during business hours to receive legal mail. Using a commercial agent (like ClearFormation) keeps your home address off the public record.

4. 4

   File Articles of Organization.

   The 'formation document' — sometimes called Certificate of Formation (Delaware, Texas) or Certificate of Organization (Pennsylvania). It lists the LLC name, registered agent, and (in some states) members or managers. Submitted to the Secretary of State with the filing fee.

5. 5

   Get an EIN from the IRS.

   Free from the IRS. Required for multi-member LLCs, anyone hiring employees, and effectively required for opening a US business bank account. ClearFormation files Form SS-4 by fax for founders without an SSN.

6. 6

   Draft an operating agreement.

   Internal document that governs ownership, voting, profit splits, and exit terms. Five states legally require one in writing (CA, DE, ME, MO, NY); all 50 strongly recommend it. Required by most banks before they'll open a business account.

7. 7

   Open a business bank account.

   Mercury, Relay, Wise, Brex, and most local banks. You'll need the approved formation document, EIN confirmation letter, and operating agreement. Mixing personal and business funds weakens your liability shield — open the account before you take in any revenue.

8. 8

   File the FinCEN BOI report (only if foreign).

   Domestic US LLCs are EXEMPT from BOI reporting since FinCEN's March 21, 2025 interim final rule. Only foreign-formed entities that register to do business in the US still file — within 30 days of registration.

9. 9

   Calendar your annual report.

   Most states require an annual or biennial report (and sometimes a franchise tax). Miss the deadline and the state administratively dissolves the LLC — and members can lose the liability shield.

What you'll need before you start

• A unique LLC name that includes "LLC" or "Limited Liability Company" and isn't already taken in your formation state.
• A formation state — usually the state you operate in. Non-US founders typically pick Wyoming, New Mexico, or Delaware.
• A US registered agent with a street address in the formation state. Included with ClearFormation; required by law in every state.
• Member names and addresses. Public on the formation document in some states; kept internal in privacy states (WY, NM, DE).
• Management structure — member-managed (every owner can act) or manager-managed (designated managers act).
• State filing fee — $40 (Kentucky) to $500 (Massachusetts). Most states are $50–$200.

How long the full process takes

State approval is 1 business day to 4 weeks depending on the state — see our full state-by-state processing time table. EIN issuance adds another 1–4 business days for US founders (instant online) or 4 business days to 4 weeks for non-US founders (fax). Bank account opening adds another 1–5 business days. Realistic end-to-end timeline: same-week for US founders in fast states; 2–4 weeks for non-US founders.

What the whole thing costs

Real-world budget for a new US LLC, all-in:

• State filing fee: $40 (KY) to $500 (MA); most states $50–$200.
• Registered agent: $50–$150/yr from commercial providers; $0 if you live in the state and want your home address on the public record.
• EIN: $0 from the IRS. Avoid services charging $100+ for what the IRS does free.
• Operating agreement: $0 if you use a template; $300–$1,500 from a lawyer for multi-member LLCs.
• First-year compliance: annual report fee ($0–$300) plus any state franchise tax (CA $800, DE $300, TX $0 below the threshold).
• Publication: only in NY ($80–$1,800 by county), AZ (often $0–$200), and NE ($40–$150).

Bundled formation services typically run $0–$300 on top of the state fee. The trade-off is convenience vs. spreading the work across four separate filings yourself.

What happens after formation

State approval is the start, not the finish. In the first 30 days you should:

1. Apply for the EIN (or confirm it arrived if filed in parallel).
2. Sign the operating agreement — even single-member LLCs need one for the bank.
3. Open the business bank account. Mercury, Relay, Wise, Brex for digital-first; local credit unions for traditional banking.
4. Set up bookkeeping (Xero, QuickBooks, Wave) and a business credit/debit card so no LLC expense ever touches a personal account.
5. Update your contracts, vendor accounts, payment processors (Stripe, PayPal), and any DBA filings to the new LLC name.
6. Calendar the annual report and franchise tax due dates for the next 5 years.
7. Foreign-qualify in any other state where you actually do business (employees, office, recurring sales presence).

Common pitfalls to avoid

• Filing in the wrong state. If you actively do business in a state, you have to register there — forming in Wyoming and operating in California means two registered agents, two annual filings, and California's $800 franchise tax anyway.
• Skipping the operating agreement. Required by 5 states, required by every bank, and what governs every co-founder dispute. Generate one even for single-member LLCs.
• Mixing personal and business funds. The fastest way to lose your liability shield. Open the business bank account before any revenue comes in.
• Missing the first annual report. Administrative dissolution is the most common reason small LLCs lose good-standing — and members can be personally liable for activity during the dissolved period.
• Forgetting the EIN application. The state filing doesn't trigger an EIN — you must apply separately with the IRS. Without one, you can't open a bank account, hire, or file taxes.

DIY vs formation service

Filing yourself costs only the state fee but means navigating the state portal, drafting the operating agreement, getting your own registered agent, and applying for the EIN separately. A formation service bundles everything into one checkout and handles the rejection-and-resubmit loop if the state pushes back. Worth it for non-US founders, anyone forming in an unfamiliar state, or anyone who simply doesn't want to handle five separate filings.

DIY usually makes sense when: you're forming in your home state, you already have a registered agent (or you'll use your own address), and you're comfortable on the state's online portal. A service tends to pay for itself when there's no US SSN, when you need privacy, or when a rejection delay would push back a hard date like a lease, bank meeting, or contract signing.

Mistakes that derail filings

• Name not 'distinguishable on the record'

  Adding 'The' or 'LLC' isn't enough to clear a near-duplicate name. Search broadly before filing.

• Using a P.O. box for the registered agent

  Almost every state requires a physical street address. A P.O. box bounces the filing.

• Skipping organizer signature

  Many state portals require the organizer's electronic signature on submission. Missing it returns the filing unprocessed.

• Filing in December

  Several states trigger franchise tax for the new year even if you formed on Dec 30. File in January if you don't need to operate in December.

• Treating BOI as still required for US LLCs

  Since March 21, 2025, domestic US entities are exempt from BOI. Only foreign-formed entities registering to do US business still file.