How to Start an LLC: The Complete 2026 Guide

Should you actually form an LLC?

Before you spend a dollar, answer one question honestly: are you running a business, or are you running a side project? If you have no revenue, no contracts, no employees, and no plans to take on any of those in the next 6 months, you do not need an LLC yet. You need a Stripe account and a working product. Forming the LLC before you have any of that just buys you a $300 paper trail and an annual report deadline.

But the moment any of the following becomes true, the math flips and you should form the LLC the same week: you sign your first paying client, you accept any work that could plausibly result in a lawsuit (consulting, contracting, anything involving someone else's property or data), you hire your first contractor or employee, or you have to sign a contract personally because the entity does not exist yet. Each of those events creates personal-liability exposure that an LLC would have blocked.

The other reason to form an LLC: legitimacy. Banks will not open a business checking account without an entity. Larger clients will not sign a master service agreement with a person doing business as a name. Payment processors increasingly require an EIN. Forming the LLC unlocks the next tier of operational infrastructure — and you cannot build that infrastructure retroactively without re-papering every contract.

Step 1: Pick your state

This is the decision the most internet ink is spilled on, and the one most founders get wrong. The honest answer for 90% of you: form your LLC in the state where you actually live and work. The Delaware-or-Wyoming-or-Nevada myth — that you can save taxes or get magic asset-protection by forming out of state — is true for roughly three specific situations, and a marketing trap everywhere else.

When your home state is the right answer

You live in California, work in California, and serve California clients? Form a California LLC. Yes, California costs $800/yr in franchise tax. No, you cannot escape that by forming in Wyoming, because operating in California still requires you to register as a foreign LLC there, which also costs $800/yr plus the foreign-LLC filing fees, plus Wyoming's fees, plus two registered agents, plus two annual reports. The "Wyoming saves you taxes" advice is just wrong for anyone with operations in a high-tax state.

The same principle applies in every state. Your LLC is taxed based on where you do business, not where you file. You need to be registered everywhere you have a meaningful business presence — and "meaningful" includes having an office, having employees, owning property, or earning a significant share of revenue from clients in that state.

When out-of-state formation actually makes sense

1. Non-US residents. If you live outside the U.S. and want a U.S. LLC for online payments, IRS classification, or US-bank-account access, Wyoming or Delaware is the standard answer. You have no home state, so there is no home state to compete with. Wyoming is usually cheaper and faster; Delaware is the answer if you might raise venture funding later.
2. Passive holding companies. If you are setting up an LLC purely to hold real estate, IP, or other passive assets — no employees, no clients in any state — you can form in Wyoming (cheap), Nevada (strong privacy), or Delaware (Series LLC for multiple properties). The key word here is passive: the moment you have an active business operating from another state, you owe foreign-LLC registration in that state.
3. VC-track startups planning a Delaware C-corp. This is the one case where Delaware really does pay off, but the answer is usually "do not form an LLC at all" — form a Delaware C-corp from day one if you know you are raising venture capital. Trying to convert from LLC to C-corp later is messier than starting clean.

For the full cost picture on each state, see our cost summaries. For deep-dives on the most common formation states, start with California, Texas, Florida, New York, or Delaware.

Step 2: Name your LLC

Your LLC name has to (a) be distinguishable from every existing entity in your state of formation, (b) include an LLC designator ("LLC", "L.L.C.", "Limited Liability Company"), and (c) avoid restricted terms (bank, attorney, doctor, etc.) unless you carry the appropriate professional licensure. Beyond that, the state does not really care.

Run a name search on your state's Secretary of State entity-search portal before you do anything else. Most states have an instant search; results are authoritative. If your preferred name is taken or "too similar" to an existing name (most states reject anything that differs only by punctuation, capitalization, or trivial words like "the"), you have three options: pick a different name, file under a different name and use a DBA for marketing, or file a name reservation while you negotiate or get clearance from the existing entity.

For a deep walkthrough of the name-search process, search rules, and name reservations, see our complete LLC name search guide. If you want to operate under a brand different from your legal LLC name, you will also need a DBA filing.

Step 3: File your Articles of Organization

This is the actual moment of LLC formation: you submit a one-page form (in some states it is called a "Certificate of Formation" or "Certificate of Organization") to the Secretary of State, you pay the filing fee, and your LLC legally exists when the state stamps the document as filed. For the full state-by-state walkthrough, see how to file your Articles of Organization.

What you put on the form

• LLC name — exact spelling, with the LLC designator (LLC / L.L.C. / Limited Liability Company).
• Principal office address — a physical street address in most states. Your home address counts, unless you want privacy (see registered agent below).
• Registered agent name + address — must be in the state of formation, must be a physical street address.
• Member/manager structure — member-managed (members run the LLC) vs manager-managed (designated managers run it). For solo and small LLCs, member-managed is the default. Full breakdown of the trade-off here.
• Purpose — most states accept a generic "any lawful purpose" statement. Do not narrow this unless you have a specific reason.
• Effective date — usually upon filing, but you can elect a future date in many states (useful for end-of-year filings to avoid a partial-year annual report).
• Organizer signature — the person filing the form. Can be you, can be a formation service.

How long it takes and what it costs

Most states accept online filings; the few that still require paper (or charge extra for online) generally process online filings in days and paper filings in weeks. Pay for expedited processing only if you have a contract that requires the LLC by a specific date — for most founders the standard processing time is fine.

Step 4: Appoint a registered agent

Every state requires every LLC to maintain a registered agent — a person or company at a physical address in the state of formation, available during business hours, designated to receive lawsuits, subpoenas, and official state mail on behalf of the LLC. You can be your own registered agent (free, but your home address goes on the public record and you must be physically available), or you can pay a service.

For most founders, the answer is to pay a commercial registered agent — $39–$200/yr depending on the service. The privacy alone is worth it: your home address stays off the public LLC database, and you are not vulnerable to being served a lawsuit at your front door in front of clients. The reliability is the other half: commercial RAs scan and forward official mail within 24 hours, which matters because missing service of process can result in a default judgment against your LLC.

Which RA service to pick

• Northwest Registered Agent — $39 year one, $125/yr after. Honest pricing, no upsells, single-state focus. The default pick for most founders. Compared to ZenBusiness here.
• ZenBusiness — $99–$199/yr. Bundled with formation if you are forming + RA together. Compared to LegalZoom here.
• LegalZoom — $249/yr. Premium brand pricing without much premium service; pick only if you are bundling with their attorney advisory products. Compared to Northwest here.
• Harbor Compliance / CSC Global — $300+/yr. The right pick for multi-state operators who need a unified compliance dashboard. Compared to Northwest here.

The full landscape — pricing, mail handling, multi-state coverage, and which RA fits which LLC — is in our registered agent services pillar guide.

Step 5: Get your EIN

Your EIN (Employer Identification Number) is your LLC's federal tax ID — the business equivalent of an SSN. Banks require it to open an account; the IRS requires it if you have employees, file employment taxes, or operate a multi-member LLC; payment processors increasingly require it. The application is free at irs.gov/businesses, takes about 15 minutes, and confirmation is immediate if you have an SSN or ITIN.

Apply after your Articles of Organization are approved by the state, not before. The EIN application asks for your LLC's legal name and state of formation, and the IRS verifies that the entity exists. Applying too early creates a name mismatch you have to clean up later.

For the full step-by-step including international founders, see how to get your EIN and EIN application for non-US residents.

Step 6: Draft your Operating Agreement

Your Operating Agreement is the internal contract that governs how your LLC operates: who owns what percentage, who has authority to bind the LLC, how profits and losses are allocated, what happens when a member leaves or dies, how new members can be added. Five states (California, Delaware, Maine, Missouri, New York) legally require an Operating Agreement; the other 45 do not — but it is still strongly recommended in every state.

Why? Three reasons. First, a written Operating Agreement is one of the strongest defenses against corporate-veil piercing — it shows you treat the LLC as a real entity, separate from yourself. Second, banks ask for it when you open a business account, even for single-member LLCs. Third, having a written record of ownership and authority matters enormously the moment anything goes wrong: a member wants out, a partner dies, a state audits you, a client sues you.

What goes in the Operating Agreement

• Ownership percentages and capital contributions
• Profit/loss allocation rules (typically pro-rata, but can be different)
• Management structure (member-managed vs manager-managed)
• Voting rules for major decisions
• Distribution policies (when, how much, who decides)
• Procedures for adding new members or transferring interests
• Buy-sell provisions (what happens when a member exits)
• Dissolution procedures
• Tax classification (default pass-through, or S-corp/C-corp election)

For single-member LLCs, a standard template works fine and you sign it yourself. For multi-member LLCs with anything non-standard (non-pro-rata distributions, vesting, complex IP contributions), get an attorney to draft it. The cost — $500–$2,500 — is far cheaper than litigating a bad Operating Agreement years later.

Free templates: our LLC operating agreement template covers the standard cases. The full operating agreement guide walks the decisions.

Step 7: Open a business bank account

Day 1 priority once the LLC is approved. Until you have a separate business bank account, every dollar that goes through your personal account is a corporate-veil-piercing risk and a bookkeeping nightmare. The fastest legitimate path: open an account at one of the neobanks (Mercury, Bluevine, Relay, Novo) — same-day approval, no minimums, no fees.

For software, SaaS, agencies, e-commerce, and most online businesses, Mercury is the default — best-in-class UI, free wire transfers, treasury features, no monthly fees, and they open accounts for non-US founders with US LLCs. For service businesses that need cash deposits, Bluevine or a local credit union — Mercury and Relay do not take cash deposits. For freelancers and solo LLCs, Lili or Found bundle tax-set-aside features that pay for themselves at tax time.

The full business banking comparison — Mercury vs Bluevine, Mercury vs Relay, Bluevine vs Novo, and when traditional banks are still the right answer — is in our business banking for LLCs pillar guide. For the step-by-step on opening an account, see how to open a business bank account.

Step 8: State tax registration + BOI report

Two more filings before you are fully operational: state tax registration (state-specific) and your Beneficial Ownership Information (BOI) report (federal, FinCEN).

State tax registration

Most states require you to register for: a state business tax ID, a sales tax permit if you sell taxable goods or services, and an employer registration if you will hire W-2 employees. Some states bundle these; some have them on separate portals. The sales tax registration is usually the most time-sensitive — many states require you to register before you accept your first dollar of taxable sales, with interest and penalties accruing on unregistered sales. The full state-by-state walkthrough: state tax registration.

Beneficial Ownership Information (BOI) report

Federal requirement since 2024: every LLC formed in 2024 or later must file a BOI report with FinCEN within 90 days of formation, identifying every "beneficial owner" (any individual owning 25% or more, plus anyone exercising substantial control). The filing is free at fincen.gov/boi, takes about 10 minutes, and the penalty for missing it is $591/day. There are exemptions for publicly-traded companies and certain large operating companies; small LLCs are all required to file. Full walkthrough: BOI report filing.

Five mistakes that bite founders later

Most LLC problems are not formation problems — they are post-formation hygiene problems. Here are the five we see most often, in order of damage caused.

1. Commingling personal and business funds. The #1 reason courts pierce the corporate veil. You opened the business account; now use it. Every dollar of business income goes through it, every business expense gets paid from it, every owner draw is a documented transfer to your personal account. Veil-piercing 101 here.
2. Missing the annual report. 38 states require an annual or biennial report. Miss it and your LLC moves to "not in good standing," which can mean losing your liability protection, losing the ability to enforce contracts, and losing your business bank account. Your registered agent should remind you; put it on Google Calendar too.
3. Skipping the Operating Agreement. Banks ask for it. Courts look at it. Members rely on it. "I will do it later" turns into "we never wrote it down" turns into "we are in arbitration over what we agreed to" three years in.
4. Forming in the wrong state to "save taxes." Reread Step 1. Forming in Wyoming when you operate in California means paying both states. The "tax-friendly state" advice is rarely correct.
5. Not electing S-corp tax treatment when it would save thousands. If your LLC is profitable above ~$80k/yr in net income, an S-corp election (free IRS Form 2553) can save $5k–$15k/yr in self-employment tax. Most accountants will not bring this up; ask. LLC vs S-corp explained.

What this actually costs

Realistic year-1 budgets for a single-member LLC, by state cost tier:

"Minimum" assumes you self-appoint as registered agent. "Realistic" assumes a commercial RA at $125/yr, an Operating Agreement template ($0–$100), and the certified-copy + BOI filings.

Ongoing costs are usually the bigger story than formation costs. Annual reports ($0–$300/yr), franchise taxes ($0–$800/yr depending on state), registered-agent renewals ($100–$250/yr), and bookkeeping/tax-prep ($300–$2,000/yr) add up to $400–$3,000/yr in steady-state. The full state-by-state cost guide has every line item.

The shortcut: have AthenAI do it

Everything in this guide is doable yourself, in about 2–4 hours of focused work, for $185–$1,200 depending on state. It is not hard work — it is just paperwork sequenced correctly, with citations checked. If you would rather not spend a Saturday on it, AthenAI handles the full sequence — state filing, registered agent, EIN, Operating Agreement, business bank account intro, and BOI filing — and keeps the compliance calendar going on your behalf.

Start free — let AthenAI form your LLC

Either way, do not put it off. The cost of the wrong decision (missed BOI filing, wrong state, commingled funds in year one) is much larger than the cost of the filing itself.

Frequently asked questions