Step-by-Step Guide: How to Set Up an LLC in 7 Steps

Learn the essential steps to set up your LLC efficiently, providing your business with necessary legal and financial protections. Follow our comprehensive guide to ensure your LLC complies with state regulations and achieves long-term success.

By Douglas Wade, Attorney

Email | Call (800) 484-4610

Have a quick question? We answered nearly 2000 FAQs.

Table of Contents

1. What is a Limited Liability Company (LLC)?

2. How to Create an LLC?

3. Additional Important Activities In the LLC Creation Process

4. Why Create an LLC?

5. LLC Types to Take Into Account

6. What is the Cost of an LLC?

7. Other Business Forms vs. LLC

8. Which Taxes Apply to LLCs?

9. FAQs

Perhaps the most crucial phase in starting a business is to create an LLC correctly. In addition to other benefits, an LLC can provide liability protection for your firm. With this article, we’ll show you how to create an LLC in only seven easy steps.

What is a Limited Liability Company (LLC)?

American business owners have the option of choosing a limited liability company (LLC), as the legal structure for their company. Establishing an LLC safeguards a person’s or organization’s private assets in the event of bankruptcy or legal issues. Given that different businesses have different operating procedures, it also permits varied taxing alternatives. Certain entities may choose to be treated as sole proprietorships, while others may choose to be taxed as corporations. To find the best choice to create an LLC, speak with a tax advisor.

How to Create an LLC?

Start your LLC right now by following these seven steps. Keep in mind that every state has its own set of laws and procedures. For information unique to your state, peruse our state LLC creation guides.

Choose a Name for Your Business.

You might be thinking mostly about marketing when you choose a name for your company. In addition, your business name needs to comply with state laws, even if choosing the appropriate name is crucial for branding.

Generally speaking, you cannot choose an organization name that has been employed by another company in your state due to state restrictions. Most jurisdictions also forbid using terms that could be interpreted as indicating you work in a certain industry, such as banking or insurance. Additionally, your company name will most likely need to conclude with “LLC”.

You can conduct a name search through the official portal of the state office in charge of business filings (often the Secretary of State) and study your state’s LLC naming regulations in addition to finding out if the brand name you seek is available.

Assign a Registered Agent role.

Each state mandates that LLCs designate a registered agent. A person who accepts formal or legal papers (such as subpoenas) as the representative of the LLC is known as a registered agent. These documents are then sent to the LLC by the registered agent after they are received.

A registered agent can be anybody who is a minimum of 18 years old, and you can use a worker’s name or your own. However, during regular business hours, the agent needs to be accessible at a location within your state. An organization that offers registered agent functions may also be chosen. There will be a charge for this, of course; registered agents may have to pay more than one hundred dollars annually.

Is it appropriate for me to act as my own authorized agent?

In all states, you are able to lawfully serve as your registered agent. That being said, just because this option is available doesn’t mean that everyone should use it. Should you choose to serve as the registered agent for your LLC, be aware that your address and name will soon be available to the public.

Serving as your LLC’s registered agent requires you to receive and manage important legal documents and notices. Even while the intention is to save money, working as an individual agent might not be the best course of action if you lack sufficient knowledge of local laws and feel that handling this kind of documentation would be difficult.

Be sure to thoroughly weigh your alternatives and maybe even get advice from a professional organization or attorney before registering as the registered agent of your LLC.

The LLC Articles of Incorporation Form for Your State Should be obtained.

Filing a document to the state agency in charge of business registrations in your state will create an LLC as an official business. Although some states refer to it differently, like a certificate of formation, this document is commonly known as the articles of organization in most states. You can utilize the form available in each state. Visit the website where you looked for business names to find the application for your state.

Put together the LLC’s Articles of Organization.

For anyone wishing to create an LLC, each state specifies the steps and standards that must be followed. The following basic details are required from you:

Name of your company
The physical location of your main office
The objective of the company
The management style of your LLC
Details about the registered agent’s contact information (and, in certain cases, the agent’s sign)
The term of the LLC

After completing these procedures, the form needs to be signed by one or more organizers or business owners.

Certain states, including Nebraska & New York, mandate that you post an announcement in the local newspaper announcing your intention to create an LLC. Before submitting the articles of organization, this stage needs to be finished.

Articles of Organization should be filed.

Before sending your organization’s papers to your state, carefully review them. Additionally, according to the state in which you are starting your firm, you will have to shell out a filing fee.

You will receive a certificate from the state certifying that your LLC is officially registered after the incorporation documents are accepted. For other essential purposes, use it to obtain a tax identification number and open a company bank account.

Draft an Operating Agreement.

Each LLC member’s specific legal, financial, and executive rights are outlined in the operating contract. More particular, it can cover who provides funding for the company, how people leave the LLC, and how gains are allocated. It should, in short, include all pertinent data regarding the activities of your LLC.

Even though an operating agreement is not required in many areas, you should nevertheless draft one. LLCs that have several partners or members should establish one to guarantee that everyone understands their respective roles and obligations. It is beneficial for single entrepreneurs as well to put the specifics on paper.

One option, particularly for one-member LLCs, is to draft your own operating agreement. In addition, you can start quickly with the many free templates available online. Hiring a knowledgeable attorney can be worth the cost in more complicated cases, including LLCs with numerous owners.

Continue to operate your LLC.

Your LLC setup is just the beginning. Following formation, you must make sure your company maintains compliance with state laws. Once more, the most up-to-date information regarding how to do so can be found on the business filing site in your state. You might have to pay a yearly filing fee and submit a report every year that includes information about your LLC.

Additional Important Activities In the LLC Creation Process

In addition to learning how to form a limited liability company, there are quite a few important tasks that must be completed that either support the new company’s success or could be extra requirements for managing your enterprise.

Obtain permits and licenses for your business

You will probably also need to fill out papers and pay fees for company permits and licenses in addition to the paperwork needed to set up your LLC. This data can probably be obtained from the same department or from the official website in the business forms & fee schedule section.

Verify what kind of permits and fees your company requires in order to lawfully function in your state. Remember that you will probably need to apply for license and permit renewals on a regular basis, so keep an eye out for deadlines. Your LLC’s legal recognition as a business could be revoked if renewal requirements are not met.

Obtain an EIN (employer identification number).

If you want to form an LLC, you must obtain an EIN. It is a crucial way to keep your company’s assets and entity apart from your personal finances, first and foremost. When creating a business registration for your LLC, banks frequently want an EIN. In addition, an EIN is required for several types of enterprises. The moment you launch your new business, you should obtain an EIN.

Split up personal and business assets.

As previously indicated, certain actions assist in separating your personal assets from those associated with your company. Initiating this process often involves obtaining an EIN and opening a business account with a bank.

Paying oneself is a related worry shared by LLC members and owners. In most cases, this means making withdrawals from the company’s account linked to the LLC. One would have to designate such a withdrawal as an “owner’s draw.” Rather than raising concerns while using company funds for personal expenses, it enables you to handle yourself as a worker paid by the organization.

Obtain Business Registrations in Additional States

Your company can be registered in as many states as you like. Furthermore, the state in which you decide to create your home or within-state organization may not be your home state. Having a registered agent in a state allows you to establish your foreign and out-of-state business.

The first step in forming a foreign LLC is to register your company in another state. For instance, if your LLC was first created in Delaware but you want to conduct business in Texas, you must file Form 304, also known as an Application for Registration of a Foreign LLC, with the Secretary of State, Texas. In order to register a company in another state, you frequently additionally need to submit extra paperwork and an acknowledgment of good standing.

For information to create an LLC in a particular state, see the guides we’ve provided below.

Why Create an LLC?

For businesses and groups looking to start a promising new company venture, LLCs are appealing. The following are some typical explanations for choosing to create LLCs:

Cheap initial setup: An LLC can often be less expensive to start and maintain than a corporation. Some states have fees that are under $100. LLCs are a great option for people looking to launch a business without having to invest a large sum of money.
Benefits for taxes: One special feature of LLCs is that, even when corporate assets are segregated from an individual’s finances, they can still be claimed on individual taxes and considered as pass-through businesses. Due to the reduced risk of double taxation, this approach is preferred by many LLC owners. Notwithstanding, LLCs can be recognized for tax reasons as a partnership, sole proprietorship, C-corporation, or S-corp.
Liability shielding: Managing an LLC offers owners and members a degree of liability protection, as the name suggests. Effective asset designation, for example, safeguards members’ assets in the event that the business is sued.

There isn’t much complexity involved in starting an LLC. There are also businesses that can assist you with finishing the documentation and even take care of yearly tasks like annual reports.

LLC Types to Take Into Account

There are a variety of LLC formats available when deciding how to form one; understanding these options is crucial to choosing the model of operation that best suits your company’s needs and intended direction. These LLC configurations consist of:

Single-member LLC: There is just one person who owns and runs this LLC. This LLC offers more tax advantages and liability protection, even though it is comparable to a sole proprietorship.
Multi-member LLC: Typical LLCs with several members, frequently separated into businesses administered by managers and members.
L3C: Often referred to as “low-profit liability businesses,” these organizations serve as a transitional structure between nonprofit and for-profit LLCs, with the latter prioritizing business objectives over financial gains.
Series LLC: Series LLCs are tier-based corporate structures in which an infinitely segregated top-tier LLC owns a succession of lower-tiered LLCs. The series’ LLCs all function largely independently of each other, and their financial resources are also mainly divided.
PLLC: This sort of business formation, which is a specialized LLC, is restricted to specific certified specialists.
Restricted LLC: Throughout the first ten years following their creation, restricted limited liability companies are not subject to taxes. Additionally, they are unable to distribute to members. The LLC’s restrictions must be specified in its articles of organization.

Atypical: Anonymous LLC

This kind of organization does not have a formal name. Rather, an LLC is considered “anonymous” if the state withholds its owner’s identity from the public. Since a lot of information regarding business formation is public knowledge, there can be good reasons why someone might seek ways of keeping every bit of their personal information as confidential as possible. A proprietor of a single-member LLC, for example, might run their business out of their house but not let the public know about it.

Currently, most states prohibit the anonymous creation of LLCs. For now, only Delaware, New Mexico, Nevada, and Wyoming are available for selection.

What is the Cost of an LLC?

Depending on the state in which it is formed, an LLC’s formation fees vary. Payment for filing your LLC registration could range from $40 to $500. Additional expenses, including paying to secure a company name or quickening the process, are not included in that. It could be necessary for you to purchase permits or business licenses for your LLC.

Furthermore, it is critical to take into account variables other than the necessary papers to organize the corporation when estimating the expenses of an LLC formation. Included in that are yearly commitments like annual reports and registered agent costs.

Other Business Forms vs. LLC

A limited liability corporation is one of the most economical and efficient methods to launch a business, which is why many entrepreneurs and prospective business owners opt to create one. Some additional business models, though, would be worthwhile to take into account. Every choice has benefits and drawbacks, yet they could all be worthwhile.

Sole Proprietorship

The most basic form of company operation is a sole proprietorship. This is an example of a person conducting business without creating an official organization. Either you or an alias may operate as a sole owner; in the latter case, you will have to file “doing business as” or DBA documents with the state, county, and occasionally local government.

Profits and revenue from the sole proprietorship are reported by the owner on their own tax filings. Paying self-employment tax, which will be 15.3% in 2023, requires preparation. Sole proprietors, in contrast to LLCs, assume all risks and are not protected from responsibility. Additionally, they are unable to operate as a corporation or as an indirect business entity. For an individual, a sole proprietorship might be a viable option initially, but they might want to think about forming a single-member LLC down the road.

Partnership

When two or more individuals band together to launch a for-profit firm, a partnership is formed as the business model. A limited partnership, limited liability partnership, or general partnership are the three forms of partnership that you can form.

Everyone has total authority and equally unlimited liabilities in a general partnership. This is not the same as a limited partnership, in which partners have limited authority and accountability while one member has full management of the day-to-day activities. There is limited liability for each member in an LLP. Similar to a partnership, a DBA may be used to conduct business with one or more of your partners as long as the required documentation is completed; however, some states may mandate partnership registration.

Because it is a “pass-through” organization, a partnership is exempt from income tax. This implies that each partner declares on their tax returns their respective portion of the gains and losses.

Corporation

Depending on the state’s regulations, it is legal to establish and run C, S, B, & closed corporations in the US. Corporations have more rigid frameworks than LLCs, which offer different kinds of flexibility.

C-Corps

The most common version of this company plan is a C-corp. It is acknowledged as a distinct tax-paying organization. There is certain limited liability protection in addition to an LLC.

Classified as shareholders, the percentage of firm shares that each individual owns indicates their degree of ownership.

S-Corps

Businesses organized as C-corps and S-corps differ mainly in their taxation structures. An S-corp is considered a “pass-through” entity that is free from federal income taxes, in contrast to a regular corporation. Rather, individual taxes are imposed on S-corp stockholders. It is conceivable for shareholders to offset gains made under this strategy with losses incurred elsewhere.

B-Corps

More businesses have made the decision to function as B-corps in the past few years. With a B-corp structure, these companies are certified by an approved third party or have their capacity for social good recognized at the state level. Usually, this has to do with their place of work, the neighborhood, or the surroundings.

Mission & purpose are where B-corps differ from other corporations; the individual or group that founded them places a high value on operating them in an ethical and open manner. To keep their status as B-corps, companies in some states need to submit yearly benefits reports that highlight how they contribute to the public’s good.

Closed Corporations

The conventional corporate structure does not exist in closed companies. An exclusive group of stakeholders manages the business in place of publicly traded stocks; an elected group of directors is not necessary.

Nonprofit Organization

An organization classified as a nonprofit cannot send any portion of its profits to its directors, officials, or members. Instead, it must operate for purposes entirely unrelated to making money. These entities can take on several classifications; for instance, you could establish a nonprofit company or partnership. Churches, public educational institutions, political groups, volunteer organizations, and labor unions are a few typical examples of nonprofits.

One of the most well-known advantages of running a nonprofit is that it is free from taxes; but, in order to keep this status, the organization needs to follow certain guidelines. For example, the IRS states that by actively pursuing private revenue streams or engaging in political lobbying activities, an organization of this type may be able to revoke its tax-exempt status.

Cooperative

An organization that is owned and run by the people and provides services to suit their needs is called a cooperative, or co-op. Insurance, financing, healthcare, telephone, electricity, housing, transportation, childcare, and utility are the usual industries in which cooperatives operate. In order to market and handle their cattle and crops, farmers frequently turn to cooperatives.

As of 2022, there were over 30,000 cooperatives operating in the United States, according to the Department of Agriculture. It is estimated that they produce over $650 billion a year.

Not only are cooperatives liable to employment, real estate, sales, and individual property taxes, but they are also subject to taxes on different utility services, workers’ compensation, unemployment benefits, and other benefits.

Which Taxes Apply to LLCs?

Depending on the laws of the state & the owner’s choice of tax status, an LLC’s taxation will vary. In the event that the LLC is recognized as a pass-through organization, it is claimed upon your personal taxes. You will probably need to pay additional taxes if you want to be treated as a company or partnership. The franchise taxes in fifteen states affect owners of LLCs.

Make sure you ascertain your tax responsibilities when creating your LLC as maintaining good status in the corporate world depends on paying taxes.

FAQs

Does my business require an LLC?

That will be totally dependent upon the needs of your small firm. A basic sole proprietorship can be sufficient for you if you work as a freelancer or as a solopreneur.

However, there are several benefits to having an LLC, including personal protection from potential financial and legal issues that may arise for your business. Additionally, LLCs are afforded additional options with regard to their taxation. Before starting any kind of business, make sure you do your homework and obtain legal and tax counsel.

Is it feasible to form an LLC without paying anything?

There is a registration fee in every state, even if the amount varies depending on the specific state. Thus, even though some businesses claim “free” LLC formation, what they really imply is that they will complete the LLC documentation at no cost to you. However, the state filing fee will still be your responsibility.

How much time is needed to register an LLC?

It could be possible to incorporate an LLC in between two and four business days if you apply online. If not, processing LLC paperwork sent in the mail might take anywhere from two to many weeks.

Can I form an LLC without a registered agent?

Even though every LLC needs a registered agent, you can designate an LLC member to fill the position or serve as your own agent. Alternatively, you could appoint a person or organization to serve as your agent.

Can an LLC and I open a joint account?

It is typical for LLCs with many members to establish joint bank accounts that are accessible to all members equally.

What is an operating agreement for an LLC?

Decisions about business and finances as well as important member duties are made in an LLC operating agreement. Before granting approval for the formation of an LLC, several states demand operational agreements.

Is it possible for an LLC to be nonprofit?

If an LLC satisfies the state’s requirements, it can operate as a nonprofit. In certain places, it might also be feasible to register an LLC as a low-profit corporation, or L3C.

Does my LLC require a physical address?

A limited liability company is not required by law to have a physical location, with the exception of the registered agent, who must accept critical documents on the company’s behalf, such as tax returns and legal notices.

Have a quick question? We answered nearly 2000 FAQs.

See all blogs: Business | Corporate | Employment

Most recent blogs:

Best Free Payroll Software for Small Businesses and Startups in 2025

Find the best free payroll software options for small businesses and startups in 2025 with essential tools and flexible features. Compare user-friendly platforms offering global payments, tax calculations, employee portals, and cloud access at no cost.

What Services Does a California Business Lawyer Provide?

A California business lawyer helps protect your company by providing legal guidance on structure, taxation, contracts, and compliance. Their services ensure you avoid costly mistakes and navigate disputes, allowing you to focus on growth.

Where Can I Find a Business Lawyer?

Find a skilled business lawyer to navigate legal matters like contracts, trademarks, and liability issues. Protect your company with expert legal advice and support.

What Are the Requirements for a Business Contract Termination Letter?

A contract termination letter must clearly state the reason for termination, reference the original contract, and follow required notice procedures. Ensuring proper documentation and adherence to contract terms helps prevent legal disputes and wrongful termination claims.

Are Verbal Contracts Binding in California?

A verbal contract can be legally binding in California, but proving its terms in court is often difficult. Written agreements provide stronger legal protection, reducing risks of disputes and misunderstandings.

Where Can I Find a Business Lawyer Near Me?

Find a business lawyer by seeking referrals, researching credentials, and ensuring they specialize in your industry’s legal needs. Schedule consultations to assess their expertise, compatibility, and pricing structure before making a final decision.

What Is the Statement of Information and When Is It Required?

A Statement of Information is a required filing for California corporations and LLCs, providing key business and leadership details. Filing deadlines vary, requiring annual or biennial submissions to maintain compliance and avoid penalties.

What Is Indemnity and How Does It Apply to Insurance Contracts?

Indemnity protects individuals and businesses from financial loss by ensuring compensation for damages under legal agreements, including insurance contracts. Various indemnity policies cover liability, property damage, and professional risks, with terms defining coverage limits and exclusions.

What Is Gross Profit and How Is It Calculated in Financial Statements?

Gross profit represents the revenue remaining after deducting the cost of goods sold, helping businesses assess production efficiency and pricing strategies. Calculating gross profit involves subtracting direct expenses from revenue, providing insights into cost control and financial performance.

What Is Gross Income and How Does It Differ From Net Income?

Gross income includes all earnings before deductions, while net income is what remains after taxes and expenses. Understanding these figures helps determine tax obligations, loan eligibility, and overall financial health.

What Is Beneficial Ownership Information and Why Is It Important for Compliance

Beneficial ownership information helps prevent financial crimes by increasing transparency in corporate structures. Businesses should stay informed on reporting requirements to avoid penalties and ensure compliance with evolving regulations.

What Is Arbitration and How Does It Resolve Disputes?

Arbitration resolves disputes by allowing a neutral third party to make binding decisions, offering privacy and efficiency over traditional litigation. Businesses and individuals prefer arbitration for its speed, cost savings, and adaptability, ensuring enforceable outcomes across various legal frameworks.

What Is a Corporation, and How Does It Differ From an LLC?

A corporation is a separate legal entity owned by shareholders, while an LLC offers flexible management and pass-through taxation. Corporations require stricter compliance and structured oversight, whereas LLCs provide fewer formalities and adaptable ownership structures.

How Do You Incorporate a Business, and What Are the Benefits?

Incorporating a business creates a separate legal entity, protecting personal assets and offering potential tax advantages. This process enhances credibility, simplifies ownership transfer, and provides growth opportunities while requiring compliance with specific regulations.

How Do You Get an LLC, and What Are the Benefits of Forming One?

An LLC provides liability protection, tax flexibility, and management freedom for business owners. Follow seven simple steps to establish one efficiently.

How Do You Start a Business, and What Are the Legal Requirements?

Starting a business in California requires careful planning, legal compliance, and financial preparation. From selecting a business structure to obtaining permits, tax registration, and funding, each step is crucial for long-term success.

How Do Accrual Accounting and Cash Accounting Differ in Financial Management?

Accrual accounting records transactions when they are earned, while cash accounting records them when money changes hands. Choosing the right method impacts taxes, financial planning, and cash flow management for businesses.

Do I Need a Permit to Operate a Vending Machine?

A vending machine business requires permits, including a business license, EIN, and compliance with state and federal regulations. Proper location approval, ADA compliance, and product labeling are essential for legal operation and profitability.

Are There Grants Available to Start a Business?

Government and private grants provide funding to help entrepreneurs start businesses, with eligibility varying by industry, location, and business type. Opportunities include federal programs, state initiatives, and private grants supporting startups, research, and minority-owned businesses.

What Is a Stock Corporation in California – General Requirements?

A stock corporation in California raises capital by selling shares, granting investors ownership and voting rights while maintaining limited liability. These corporations, classified as C or S, follow specific legal steps, including filing Articles of Incorporation and drafting corporate bylaws.

Is a Contract Valid Only if It Is in Written Form?

A contract can be legally binding whether written or verbal, but some agreements, such as real estate deals, require written documentation. A valid contract must include clear terms, mutual agreement, legal capacity, consideration, and intent to create enforceable obligations.

What Is a Cash Receipt and Why It Matters for Business Transactions

A cash receipt records the exchange of cash during a transaction, detailing the amount, parties involved, and purchase specifics. Maintaining accurate cash receipts supports tax reporting, financial management, and dispute resolution while ensuring compliance with audits.