Starting a business is exciting, but choosing the right structure can feel overwhelming. One of the most popular and flexible options for small business owners is the Limited Liability Company (LLC). In this beginner-friendly guide, you’ll learn how to start an LLC step by step, what it legally means, and how to get it done the right way in 2025.
An LLC offers legal protection, tax flexibility, and credibility for your business — all while being easier to manage than a corporation.
What Is an LLC?
A Limited Liability Company (LLC) is a legal business structure that blends the flexibility of a sole proprietorship with the liability protection of a corporation. It separates your personal assets from your business liabilities, meaning your personal property — like your car or home — is generally protected if your company faces legal or financial issues.
This type of entity is governed at the state level, and the rules for forming one vary slightly depending on where you live. However, the core steps remain consistent across most states.
Benefits of Forming an LLC
Creating an LLC provides key advantages for entrepreneurs and freelancers alike. These include:
- Limited personal liability: Your personal assets are protected if the business is sued or faces debt.
- Pass-through taxation: Business profits pass directly to your personal tax return, avoiding corporate taxes.
- Credibility: Customers and partners tend to trust businesses that are officially registered.
- Flexibility: You can choose how you’re taxed (sole proprietorship, partnership, or corporation).
- Simplicity: LLCs are less complex than corporations and typically have fewer filing requirements.
How to Start an LLC: Step-by-Step
1. Choose Your State
You can form your LLC in any U.S. state, but it’s usually best to do so where you plan to conduct business. If your company will operate in multiple states, you may need to register as a “foreign LLC” in each additional state.
Each state has its own filing requirements, fees, and ongoing obligations. For example, forming an LLC in California includes an $800 annual franchise tax, while in Wyoming, ongoing fees are lower.
2. Pick a Name for Your LLC
Your LLC name must be distinguishable from other business entities already registered in your state. It must also include “Limited Liability Company” or an abbreviation such as “LLC” or “L.L.C.”
Before registering, check your state’s business name database to ensure availability. You may also want to reserve your name if you’re not ready to file yet. Additionally, securing a matching domain name is highly recommended for branding and website use.
3. Appoint a Registered Agent
A registered agent is a person or business entity that receives legal notices and official government documents on behalf of your LLC. Most states require you to designate one when filing your LLC paperwork.
You can act as your own agent or hire a professional service. Just make sure the agent has a physical address in the state where the LLC is formed and is available during business hours.
4. File Articles of Organization
The Articles of Organization (sometimes called Certificate of Formation) is the official document you submit to your state to create your LLC. This form typically includes:
- LLC name and address
- Registered agent’s name and contact info
- LLC purpose (general or specific)
- Management structure (member-managed or manager-managed)
You’ll need to pay a state filing fee, which ranges from $50 to $500 depending on your state.
5. Create an Operating Agreement
Although not always legally required, an Operating Agreement is a critical internal document that outlines how your LLC will be run. It helps prevent future conflicts and shows courts you’re operating as a formal business entity.
This document typically includes:
- Member roles and ownership percentages
- Voting rights and responsibilities
- Rules for profit sharing and distributions
- Procedures for adding or removing members
- Dissolution procedures
If you’re a single-member LLC, an Operating Agreement is still recommended for clarity and legal protection.
6. Get an EIN from the IRS
An Employer Identification Number (EIN) is like a Social Security Number for your business. It’s required if you plan to hire employees, open a business bank account, or file federal taxes as an LLC.
You can apply for an EIN for free through the IRS website. The process only takes a few minutes, and you’ll receive your number immediately if applying online.
7. Open a Business Bank Account
Separating your personal and business finances is essential. A dedicated business bank account helps with bookkeeping, tax prep, and protecting your personal liability.
To open one, most banks will require:
- A copy of your Articles of Organization
- Your EIN
- Your Operating Agreement (in some cases)
Using a business credit card is also a good way to build your company’s credit profile over time.
8. Comply with State and Local Requirements
Your state may require ongoing compliance after formation. These can include:
- Filing annual or biennial reports
- Paying annual franchise taxes or fees
- Maintaining a registered agent
- Renewing business licenses or permits
Be sure to check with your state’s Secretary of State website and local government agencies to avoid penalties or administrative dissolution.
Common Mistakes to Avoid
- Using a personal bank account for business finances
- Missing annual report deadlines
- Failing to get necessary licenses or permits
- Choosing the wrong management structure (member-managed vs. manager-managed)
- Not having an Operating Agreement (even if it’s not required in your state)
Avoiding these missteps helps keep your business legally sound and financially stable.
Final Thoughts on How to Start an LLC
Now that you understand how to start an LLC step by step, you’re ready to launch your business with confidence. While the process might seem complicated at first, breaking it down into clear, manageable tasks makes it entirely doable — even for first-time entrepreneurs.
From choosing a name and filing paperwork to setting up your finances, each step is a move toward legal legitimacy and business growth. Take your time, follow your state’s rules, and consider professional help if you’re unsure about any part of the process.