Introduction
Starting a business is exciting. Protecting it is smart. An LLC — a Limited Liability Company — is the most popular business structure for entrepreneurs in the United States, and for good reason: it separates your personal assets from your business liabilities, gives your business a professional identity, and opens doors to business banking, contracts, and credibility.
The good news? Forming an LLC is simpler than most people think. You don’t need a lawyer. You don’t need an accountant. And you don’t need to spend thousands of dollars. This guide walks you through every step.
Affiliate disclosure: This post contains affiliate links. If you make a purchase through one of these links, ProBusinessStrategy may earn a small commission at no extra cost to you. We only recommend services we genuinely believe in.
What Is an LLC?
An LLC (Limited Liability Company) is a legal business structure that combines the simplicity of a sole proprietorship with the liability protection of a corporation.
In plain terms: if your business gets sued or can’t pay its debts, your personal assets — your house, car, savings — are protected. Without an LLC, those assets are fair game.
Key benefits of an LLC:
Personal liability protection — your personal assets are legally separate from your business
Pass-through taxation — business profits flow directly to your personal tax return (no double taxation like a corporation)
Credibility — clients, vendors, and banks take “Your Business LLC” more seriously than a sole proprietorship
Business banking — most banks require an LLC or corporation to open a business bank account
Flexible management — no board of directors, no required annual meetings, minimal paperwork
Do You Actually Need an LLC?
Not everyone needs an LLC immediately. Here’s a quick guide:
Start as a sole proprietor if:
You’re just testing a business idea
Your revenue is under $1,000/month
You have low liability risk (online services, writing, consulting)
You want to validate before investing in formal structure
Form an LLC when:
You’re making consistent money ($1,000+/month)
You’re signing contracts with clients
You’re selling physical products (higher liability risk)
You want to open a business bank account
You’re hiring employees or contractors
You want to appear professional to larger clients
The bottom line: Most serious entrepreneurs should form an LLC once they’re generating consistent revenue. The protection is worth far more than the formation cost.
LLC vs. Other Business Structures
| Structure | Liability Protection | Taxation | Complexity | Best For |
|---|---|---|---|---|
| Sole Proprietorship | ❌ None | Personal return | Very simple | Testing ideas, early stage |
| LLC | ✅ Strong | Pass-through | Simple | Most small businesses |
| S-Corporation | ✅ Strong | Pass-through + payroll | Moderate | Profitable businesses ($80K+/year) |
| C-Corporation | ✅ Strong | Double taxation | Complex | Startups seeking investors |
| Partnership | ❌ Limited | Pass-through | Moderate | Multi-owner businesses |
For the vast majority of solo entrepreneurs and small business owners, an LLC is the right choice. It’s the sweet spot of protection, simplicity, and tax efficiency.
Step 1: Choose Your State
Every LLC is formed in a specific U.S. state. You have two options:
Option A: Form in Your Home State (Recommended for Most)
If you operate your business locally or primarily online from one state, form your LLC in the state where you live. It’s simpler, cheaper, and avoids extra compliance in multiple states.
Option B: Form in Delaware, Wyoming, or Nevada
These states are popular for specific reasons:
Delaware — Preferred by venture-backed startups and investors. Strong legal precedent, flexible corporate laws.
Wyoming — No state income tax, strong privacy protections, low annual fees (~$60/year).
Nevada — No state income tax, strong asset protection laws.
Important caveat: If you form in a “favorable” state but operate in a different state, you’ll likely need to register as a “foreign LLC” in your home state anyway — paying fees in both states. For most small businesses, this extra complexity isn’t worth it.
Verdict for most entrepreneurs: Form in your home state. Save Wyoming or Delaware for when you have specific reasons (investors, privacy, multi-state operations).
Step 2: Choose Your LLC Name
Your LLC name must meet your state’s requirements and be distinguishable from other registered businesses. Here’s how to choose well:
Naming Rules (Apply in Every State)
Must include “LLC,” “L.L.C.,” or “Limited Liability Company” in the name
Cannot include words that imply it’s a government agency (e.g., “FBI,” “Treasury”)
Cannot include regulated words without proper licensing (e.g., “Bank,” “Insurance,” “University”)
Must be distinguishable from other LLCs in your state
How to Check Availability
Search your state’s Secretary of State business database (free, searchable online)
Search the USPTO trademark database at tmsearch.uspto.gov to avoid trademark conflicts
Check that the .com domain is available — even if you already have a website, you want the matching domain
Naming Strategy
Keep it simple — easy to spell, easy to say, easy to remember
Make it searchable — include a keyword if possible (e.g., “Smith Design LLC” or “Blue Peak Consulting LLC”)
Avoid trendy spellings — “Kre8tive Solutions” causes confusion and looks unprofessional
Think long-term — will this name still make sense if your business expands?
Tip: You can operate your LLC under a different name using a DBA (“Doing Business As”) filing. Your legal entity can be “Smith Holdings LLC” while your brand name is “Blue Peak Creative.”
Step 3: Choose a Registered Agent
Every LLC is required to have a registered agent — a person or company designated to receive legal documents and official government mail on behalf of your business.
Requirements for a Registered Agent
Must be located in the state where your LLC is formed
Must have a physical street address (no P.O. boxes)
Must be available during normal business hours
Your Options
Option A: Be Your Own Registered Agent
You can serve as your own registered agent if you have a physical address in the formation state. The downside: your address becomes public record, and you must be available at that address during business hours.
Option B: Use a Professional Registered Agent Service (Recommended)
A registered agent service receives legal mail on your behalf, keeps your personal address off public records, and forwards important documents to you. Costs $50–$125/year.
The best services include:
Northwest Registered Agent — Most privacy-focused, excellent customer service, $125/year
ZenBusiness — Includes registered agent service with their LLC formation packages
Incfile/Bizee — Budget option, $119/year
Step 4: File Your Articles of Organization
The Articles of Organization (called “Certificate of Formation” in some states) is the official document that legally creates your LLC. Filing this document with your state is the core step in forming your LLC.
What the Articles of Organization Include
Your LLC name
Your registered agent’s name and address
Your business address
Names of the LLC members (owners) — required in most states
Purpose of the business (most states accept “any lawful purpose”)
Management structure (member-managed vs. manager-managed)
How to File
Option A: File Directly with Your State (DIY)
Every state has an online portal where you can file directly. Costs vary:
Cheapest: Kentucky ($40), Colorado ($50), Arkansas ($45)
Most popular: Delaware ($90), Wyoming ($100), Florida ($125)
Most expensive: Massachusetts ($500), Tennessee ($300)
Find your state’s filing portal by searching “[Your State] Secretary of State LLC filing.”
Option B: Use an LLC Formation Service (Recommended)
Formation services handle the paperwork for you, often for the same cost as filing yourself (you still pay the state fee).
The Best LLC Formation Services in 2026
| Service | Formation Cost | What’s Included | Best For |
|---|---|---|---|
| ZenBusiness | From $0 + state fee | Filing, registered agent (1st year), worry-free guarantee | Best overall value |
| Northwest Registered Agent | $39 + state fee | Filing, registered agent (1st year), privacy protection | Best for privacy |
| Bizee (formerly Incfile) | $0 + state fee | Filing, registered agent (1st year) | Best free option |
| LegalZoom | $79 + state fee | Filing, legal support options | Best for legal add-ons |
| Rocket Lawyer | $99.99 + state fee | Filing + legal documents | Best for legal documents |
Why ZenBusiness Is the Top Recommendation
ZenBusiness has become the go-to LLC formation service for entrepreneurs, and it’s easy to see why:
Starts at $0 + state fee — the most affordable option with real support
Registered agent included for the first year (saves $100–$125)
Worry-free guarantee — they correct any errors at no extra charge
Fast turnaround — standard 2–3 weeks; expedited options available
Ongoing compliance reminders — so you never miss an annual report deadline
Excellent customer support — real humans, not just automated systems
Trusted by 500,000+ business owners — one of the most reviewed formation services online
Form your LLC today: Get started with ZenBusiness here → — plans start at $0 + your state’s filing fee. Most LLCs are formed within 1–3 business days after state processing.
Step 5: Create an Operating Agreement
An operating agreement is an internal document that outlines how your LLC is managed, how profits are distributed, and what happens if an owner leaves or the business is dissolved.
Is an Operating Agreement Required?
Legally required in: California, Delaware, Maine, Missouri, Nebraska, New York
Strongly recommended everywhere else — even if you’re the only member.
Why You Need One Even as a Solo Owner
Without an operating agreement, your state’s default LLC rules apply — which may not reflect your intentions. An operating agreement:
Reinforces your LLC’s legal separation from yourself (critical for liability protection)
Specifies how profits are distributed
Outlines what happens if you become incapacitated or want to dissolve the business
Is required by many banks when opening a business bank account
What to Include in Your Operating Agreement
Basic sections for a single-member LLC:
LLC name and purpose — legal name, principal business address, business activities
Member information — your name, address, and ownership percentage (100% if solo)
Management structure — member-managed (you run it) or manager-managed (someone else runs it)
Capital contributions — how much money you’re putting into the business
Profit and loss distribution — how profits are taken out (typically through “owner’s draws”)
Dissolution procedures — what happens when/if the LLC is wound down
Signature and date
Where to Get an Operating Agreement
ZenBusiness — Includes an operating agreement template with their formation packages
Northwest Registered Agent — Provides state-specific operating agreement templates
Rocket Lawyer — Guided operating agreement builder with attorney review option (~$39.99)
Free templates — Available from many state bar associations and SCORE.org
Step 6: Get Your EIN (Employer Identification Number)
An EIN is essentially a Social Security Number for your business. You need it to:
Open a business bank account
File business taxes
Hire employees
Apply for business licenses
Apply for business credit cards
How to Get Your EIN
Apply directly through the IRS — it’s free and takes 5 minutes:
Click “Apply Online Now”
Select “Limited Liability Company” as your entity type
Follow the prompts — you’ll need your LLC name, address, and Social Security Number
Your EIN is issued immediately on screen — save it
Warning: Many services charge $50–$100 to “get your EIN for you.” This is unnecessary. The IRS application is free, instant, and takes 5 minutes. Never pay for EIN filing.
Non-U.S. citizens: You can obtain an EIN by mailing or faxing IRS Form SS-4. You do not need a Social Security Number to get an EIN as a foreign national.
Step 7: Open a Business Bank Account
This step is non-negotiable. Mixing personal and business finances is the #1 mistake new LLC owners make — and it can actually undermine your liability protection if a court determines your business and personal finances are indistinguishable.
What You Need to Open a Business Bank Account
Your LLC’s Articles of Organization (filed with the state)
Your EIN
Your operating agreement
A government-issued ID
Your initial deposit (varies by bank — some have no minimum)
Best Business Bank Accounts for LLCs
| Bank | Monthly Fee | Minimum Balance | Best For |
|---|---|---|---|
| Mercury | $0 | $0 | Online businesses, startups |
| Relay | $0 | $0 | Small businesses needing multiple accounts |
| Chase Business Complete | $15 (waivable) | $2,000 to waive | Brick-and-mortar businesses |
| Bank of America Business | $16 (waivable) | Varies | Established businesses |
| Novo | $0 | $0 | Freelancers and solopreneurs |
Recommendation: For most online entrepreneurs and small businesses, Mercury or Relay offer zero-fee business checking with excellent features — no minimum balance, built-in expense tracking, and seamless integration with accounting tools.
Step 8: Get the Required Licenses and Permits
Forming an LLC creates the legal entity — but you may also need licenses and permits to actually operate your business legally. Requirements vary by:
Business type — restaurants, contractors, healthcare, and financial services have strict licensing requirements
Location — city, county, and state requirements differ
Activities — selling taxable goods requires a sales tax permit
Common Licenses and Permits
Federal:
No federal business license required for most businesses
Required for specific industries: firearms (ATF), broadcast media (FCC), airlines (FAA), investment advisors (SEC)
State:
Professional licenses (doctors, lawyers, real estate agents, contractors)
Sales tax permit (required if you sell taxable goods or services)
Most states: searchable at your state’s business portal
Local:
Business operation license (many cities require this for all businesses)
Zoning permits (if operating from home — check local ordinances)
Signage permits (for physical locations)
How to Find Your Requirements
Search “[Your State] business license requirements”
Use the SBA’s Business License & Permit search at sba.gov
Contact your local city or county clerk’s office
Step 9: Understand Your Tax Obligations
One of the biggest advantages of an LLC is its flexible tax treatment. Here’s what you need to know:
Default Tax Treatment: Pass-Through Taxation
By default, a single-member LLC is treated as a “disregarded entity” for federal tax purposes. This means:
Your LLC’s profits and losses are reported on your personal tax return (Schedule C)
You pay self-employment tax (15.3%) on your net profits
No separate corporate tax return required
Alternative Tax Elections
S-Corporation Election (For Higher Earners)
Once your LLC is generating $60,000–$80,000+ in annual profit, electing S-Corp status can save thousands in self-employment taxes. With an S-Corp election:
You pay yourself a “reasonable salary” (subject to payroll taxes)
Remaining profits are distributed to you as an owner’s distribution (not subject to self-employment tax)
Example: $100,000 profit as a sole proprietor = ~$14,130 in self-employment taxes. As an S-Corp with a $50,000 salary: ~$7,065. Savings: ~$7,000/year.
Consult a CPA before making this election — the compliance costs (payroll processing, additional tax filings) need to be weighed against the savings.
Partnership Taxation (For Multi-Member LLCs)
Multi-member LLCs are automatically taxed as partnerships. Each member reports their share of profits on their personal return.
Quarterly Estimated Taxes
As an LLC owner, no employer withholds taxes for you. You’re responsible for paying estimated taxes quarterly:
Due dates: April 15, June 15, September 15, January 15
General rule: Pay 100% of last year’s tax liability in quarterly installments to avoid penalties
Accounting Tools
FreshBooks is the top recommendation for LLC owners managing their own accounting:
Tracks income and expenses automatically
Generates professional invoices
Calculates estimated quarterly taxes
Produces profit & loss reports for tax time
Integrates with your bank account
Starts at $17/month
Alternatively, Wave Accounting is completely free and handles the basics well for very early-stage businesses.
Step 10: Maintain Your LLC (Ongoing Compliance)
Forming your LLC is a one-time event. Maintaining it is an ongoing responsibility. Most states require annual reports and fees to keep your LLC in good standing.
Annual Report Requirements
| State | Annual Report Fee | Due Date |
|---|---|---|
| California | $800 minimum franchise tax | Each year |
| Florida | $138.75 | May 1 each year |
| Texas | No income tax; franchise tax varies | May 15 each year |
| New York | $9 (biennial) | Every 2 years |
| Wyoming | $60 minimum | Anniversary of formation |
| Delaware | $300 flat fee | June 1 each year |
Failing to file annual reports leads to your LLC being dissolved by the state — meaning you lose your liability protection.
Ongoing Compliance Checklist
File annual report — check your state’s deadline
Pay franchise or minimum tax — if required in your state
Maintain a registered agent — your agent must remain active
Keep business and personal finances separate — always
Pay quarterly estimated taxes — April, June, September, January
Keep records — bank statements, contracts, receipts, major decisions
Update your operating agreement if ownership or structure changes
ZenBusiness sends compliance reminders and can file your annual reports on your behalf — so you never miss a deadline.
How Much Does an LLC Cost?
One-Time Costs
| Cost | Amount |
|---|---|
| State filing fee | $40–$500 (varies by state) |
| Formation service (optional) | $0–$99 |
| Registered agent (year 1, if included) | $0–$125 |
| Operating agreement (if using a service) | $0–$40 |
| EIN | Free (IRS direct) |
| Typical total | $50–$700 |
Annual Costs
| Cost | Amount |
|---|---|
| Registered agent renewal | $50–$125/year |
| Annual report filing fee | $50–$800/year (varies widely) |
| State franchise or minimum tax | $0–$800/year |
| Accounting software | $0–$200/year |
| Typical annual total | $100–$1,200/year |
LLC Formation: State-by-State Quick Guide
Most Business-Friendly States
Wyoming
Filing fee: $100
Annual report: $60 minimum
State income tax: None
Privacy: Strong (no public member names required)
Best for: Privacy-conscious entrepreneurs, online businesses
Delaware
Filing fee: $90
Annual tax: $300
State income tax: For businesses operating in Delaware
Best for: Businesses seeking investors, startups planning to raise capital
Florida
Filing fee: $125
Annual report: $138.75
State income tax: None
Best for: Florida residents and businesses
Texas
Filing fee: $300
Franchise tax: Varies (no tax for revenue under $2.47M)
State income tax: None
Best for: Texas residents
Frequently Asked Questions
Can I form an LLC myself without a formation service?
Yes. Filing directly with your state is perfectly valid and saves the service fee. The trade-off is time and the risk of errors. Formation services are worth it for the peace of mind and included registered agent service.
Can a non-U.S. citizen form a U.S. LLC?
Yes. There’s no citizenship requirement to form a U.S. LLC. Non-residents can form LLCs in any state. Wyoming and Delaware are popular choices for international entrepreneurs.
How long does it take to form an LLC?
Standard processing: 1–4 weeks depending on the state. Many states offer expedited processing (1–5 business days) for an additional fee. Delaware can be as fast as same-day for an extra fee.
Do I need a lawyer to form an LLC?
No. The vast majority of small business owners form their LLC without a lawyer. Formation services like ZenBusiness handle everything. Consult a lawyer only if your situation is complex (multiple owners, investor funding, complex agreements).
Can I have multiple LLCs?
Yes. Many entrepreneurs create separate LLCs for different businesses or assets. There’s no legal limit on how many LLCs you can own.
What’s the difference between a single-member LLC and a multi-member LLC?
A single-member LLC has one owner. A multi-member LLC has two or more owners. The main differences are in taxation (multi-member LLCs file a partnership tax return) and the operating agreement (multi-member agreements are significantly more complex).
Do I need an LLC if I’m just freelancing?
Not immediately — but once you’re making consistent income and signing contracts, an LLC protects your personal assets from any client disputes or lawsuits. Most full-time freelancers eventually form one.
Your LLC Formation Checklist
Choose your state
Choose and verify your LLC name (Secretary of State database)
Choose a registered agent
File Articles of Organization (via ZenBusiness or directly with the state)
Create your operating agreement
Apply for your EIN at IRS.gov (free)
Open a business bank account
Obtain any required licenses and permits
Set up accounting software (FreshBooks or Wave)
Schedule quarterly tax payment reminders
Note your annual report deadline
The Bottom Line
Forming an LLC is one of the best investments you can make in your business. The protection it provides — keeping your personal assets separate from your business liabilities — is worth far more than the modest cost of formation.
You don’t need a lawyer. You don’t need to spend thousands. With a service like ZenBusiness, you can have a legally formed LLC in as little as 24–48 hours for the cost of your state’s filing fee.
If you’re serious about your business, protect it.
Ready to form your LLC? Start with ZenBusiness here → — plans start at $0 + your state filing fee. Includes registered agent for the first year and ongoing compliance support.
