If you’ve thought about starting an LLC, you’re in the right place. An LLC (limited liability company) gives you a formal business structure that separates your personal assets from your business’s debts and obligations—without forcing you into the heavy formalities of a traditional corporation.

Selecting an LLC business structure is a smart decision. It limits your personal liability while giving you more flexibility and simplicity than a traditional corporation. You also keep tax flexibility—by default profits pass through to the members, and you can later elect S-corp or C-corp taxation if that better fits your income and payroll strategy.

LLCs offer a streamlined setup process, flexible tax treatment, ease of administration, and fewer ongoing reporting requirements. Single-member and multi-member setups are both common, and you won’t be required to hold shareholder meetings or maintain a board. Many entrepreneurs, freelancers, real estate investors, and ecommerce owners prefer LLCs for these reasons.

Although each state has its own rules and requirements, the basic steps to start an LLC are fairly universal. You can do it yourself or get help from a service like LegalZoom, which streamlines filings, provides registered agent service, offers operating agreement templates, and can bundle ongoing compliance and beneficial ownership reporting support.

4 Steps to Start an LLC

Anyone can start an LLC by following the instructions below. At a high level, you’ll choose a state, name your company, file the right documents, and then handle a few launch tasks:

  1. Choose your governing state
  2. Pick your company name
  3. Sort out your paperwork
  4. Kickstart your LLC business

The Easy Part of Starting an LLC

LLCs are often the go-to business structure for business owners and entrepreneurs, and it’s easy to see why. Most states let you file online, approvals can be quick (often days, with expedited options), and there aren’t many ongoing formalities beyond basic annual filings and fees.

The business formation process is very straightforward. You can handle it yourself, or partner with trusted providers like LegalZoom to take care of the legal filings and state compliance for you. This saves time, reduces errors, and gives you reminders for things like annual reports so you don’t accidentally fall out of good standing.

These services handle everything—formation documents, registered agent filings, and legal compliance. Some, like LegalZoom, even provide legal guidance, operating agreements, EIN application help, beneficial ownership (BOI) reporting assistance, and ongoing support for the life of your business.

While paperwork is part of the deal when forming a legal entity, forming and maintaining an LLC is much easier than other business types. And if you’d rather not deal with it at all, LegalZoom or other filing services can handle the heavy lifting while you stay focused on customers and growth.

The Difficult Parts of Starting an LLC

Even great business structures have trade-offs. The goal is to know the friction points so you can plan around them.

You’ll definitely face some key challenges when creating an LLC, which you have to prepare for. One of the most important steps is choosing the right state for formation. Some states have lower filing fees or more business-friendly tax laws, but the wrong decision can lead to unnecessary costs, publication requirements, or extra red tape—especially if you end up registering as a “foreign” LLC where you actually operate. Services like LegalZoom can help you weigh your options.

LLCs are formed according to state-specific regulations, which means the filing requirements and fees will vary. Beyond the initial Articles of Organization, some states require initial reports, annual reports, or franchise/LLC taxes. Missing a deadline can cost you time, money, and even your legal status.

Naming your LLC is another potential challenge.

Your company name must be unique and meet your state’s naming rules. With many names already taken, you might not get your first pick, and you’ll also want to avoid conflicts with existing trademarks. Fortunately, LegalZoom and others can help with business name searches and availability checks to reduce the risk of rejections or disputes.

Don’t worry—these challenges are manageable with the right preparation. Keep reading as I break down each step in detail so you can form your LLC smoothly and confidently.

Step 1: Choose Your Governing State

Every state has its own set of rules and regulations concerning LLC formation. That’s why choosing your governing state is the first major decision you need to make—and it has downstream effects on fees, taxes, reporting, and where you’ll need a registered agent.

Know Your State-Specific Laws

Your best bet is to form your LLC in the state where you live and plan to do business. This keeps things simple, avoids duplicate fees, and minimizes extra paperwork associated with “foreign” registrations.

If your company has a physical presence (like offices or storefronts) in multiple states, you’ll need to register as a foreign LLC in each of those states. “Doing business” can also be triggered by employees, regular in-state clients, or significant revenue—review each state’s definition so you don’t accidentally operate without authority.

Some states offer business-friendly legal environments or lower fees. If you’re thinking about forming an LLC in a different state, make sure to research the added costs and filing requirements—or let a service like LegalZoom handle the details for you. Consider annual report fees, franchise/LLC taxes, and any publication requirements that still exist in some states.

Once you’ve chosen your state, familiarize yourself with its specific rules for LLC formation. Note approval timelines, initial report requirements (if any), and the exact due dates for your first annual report and fees so you can set a compliance calendar from day one.

Step 2: Pick Your Company Name

Choosing a name might seem simple, but it can quickly become one of the trickier steps. You want something on-brand, legally compliant, and free of conflicts with other businesses.

Your LLC name must be distinguishable from existing businesses in your state. It should reflect your brand and comply with your state’s naming rules. LegalZoom can help you run a comprehensive name search and even reserve it while you complete your filing, which prevents someone else from grabbing it mid-process.

Yes, you read that right: every state has specific rules when it comes to LLC names.

Consider State Guidelines

Although the rules vary state by state, there are a few general guidelines you’ll need to follow when choosing your LLC name:

  1. Your company name must include “limited liability company” or an abbreviation like LLC or L.L.C. This signals your liability shield to the public.
  2. It cannot include terms that suggest affiliation with a government agency (like FBI, Treasury, or State Department). Words that imply you’re a government body are typically prohibited.
  3. If you want to use a restricted word (like Bank, University, or Attorney), you may need to file extra forms or include a licensed individual in your LLC. States use these rules to protect consumers.

Your LLC’s legal name and brand name can be the same—but they don’t have to be.

The legal name appears on your documents and government filings. Your brand name is what customers will see in marketing. If they’re different, you’ll need to file a DBA (“Doing Business As”) form in your state so you can accept payments and sign contracts under the brand name.

For example, Hewlett-Packard is the legal name, but the brand is HP. Many small businesses do the same to keep their brand short and memorable.

LegalZoom offers DBA filing services as well, which can help simplify this process and keep your bank, payment processor, and tax records consistent.

Check Name Availability

Once you’ve brainstormed a few names, you’ll need to verify that they’re available for use.

Check your state’s business name database first. Then confirm the domain name and social media handle availability to avoid branding issues (consistency helps with trust and SEO).

Even if you don’t plan on building a website right away, owning the matching domain will protect your brand later on.

Lastly, do a federal trademark search via the U.S. Trademark Electronic Search System to ensure your name isn’t already trademarked. If you plan to grow nationally, consider filing your own trademark or working with a provider to secure it.

Reserve Your Company Name

If you’re not ready to file yet, most states allow you to reserve your name for a set period. This protects it while you finalize other steps like your operating agreement or initial capital contributions.

The reservation process and fees vary by state. Services like LegalZoom can handle this step for you to save time and hassle.

Step 3: Sort Out Your Paperwork

Paperwork is part of the LLC formation process, and accuracy matters. From Articles of Organization to your Operating Agreement, each document must be completed and filed correctly. Getting the details right up front prevents rejection notices and keeps your start date on track.

Enlist a Registered Agent

A registered agent accepts legal documents on behalf of your business. This person or service must be available during business hours and have a physical address in the state.

Most states require this by law. You can serve as your own agent, use an individual, or hire a service. LegalZoom includes registered agent services in many of its LLC packages, which adds privacy (their address appears on public records) and ensures time-sensitive documents get handled promptly.

File Your LLC Documents

To officially form your LLC, you must file Articles of Organization (or Certificate of Organization) with your Secretary of State. This document makes your business legal and typically lists your business name, principal address, registered agent, and management method (member-managed or manager-managed).

Filing requirements differ by state. Some require additional forms or fees, such as initial reports or publication notices. LegalZoom helps you navigate all the filing steps based on your state’s requirements and can submit electronically where available to speed up approval.

You can also consult an attorney if you want help, but using a filing service is often faster and more cost-effective, especially for straightforward single-member or multi-member LLCs.

Create an LLC Operating Agreement

The operating agreement defines ownership, member responsibilities, and how your LLC will run. While not always legally required, it’s essential for clarity, banking, and dispute prevention—even for single-member LLCs.

This document outlines who owns what, how profits are distributed, how votes work, and what happens if someone leaves. Services like LegalZoom offer customizable templates that meet your state’s standards and reflect your management style.

Here’s what an operating agreement typically includes:

  • Organization: LLC creation details, members, and ownership shares, plus the effective date and principal office
  • Management and Voting: Roles, voting rights, and decision-making structure, including manager authority and member approvals
  • Distributions: Profit sharing, capital distributions, and how/when draws can be taken
  • Capital Contributions: Initial and future investments from members and how additional contributions are handled
  • Membership Changes: Rules for adding/removing members, transfers, and buyout provisions
  • Dissolution: What happens if you close or sell the business, including winding-up and record-keeping

Step 4: Kickstart Your LLC Business

This is where the real work begins! With a clean formation and clear operating rules, you’re ready to set up finances, taxes, and day-to-day operations.

With your LLC officially formed, here are a few final steps to get your business running smoothly. You’ll secure your EIN, open bank accounts, handle licensing, complete any beneficial ownership reporting, and put systems in place for bookkeeping, payroll (if applicable), and state taxes.

Get an EIN From the IRS

An Employer Identification Number (EIN) is like a Social Security number for your business. You’ll need it for taxes, hiring employees, opening bank accounts, and most payment processors.

You can get one for free from the IRS online. If you prefer hands-off help or don’t have an SSN/ITIN, services such as LegalZoom can assist with preparing and submitting the EIN application as part of your LLC package.

Open Company Bank Accounts

Open a business checking account to separate personal and business finances. This is essential for protecting your LLC’s limited liability status and managing money responsibly. Commingling funds can weaken your liability shield and complicate taxes.

Different banks have different requirements. Many will ask for your EIN, LLC formation documents, and operating agreement; some also request a banking resolution. Compare fees, online tools, and integrations with your accounting software to find a strong long-term fit.

Single-member LLCs aren’t always required to open a separate account, but it’s strongly recommended either way. Keep clean records, use a dedicated card, and set up basic bookkeeping from day one.

LLC Taxes and Paying Yourself

Your LLC’s legal structure is separate from how it’s taxed. By default, a single-member LLC is taxed as a sole proprietorship and a multi-member LLC is taxed as a partnership. You can later elect to be taxed as an S-corporation or C-corporation if that better matches your profits, payroll, and growth plans. Understanding the differences helps you keep more of what you earn and avoid compliance headaches.

Default Taxation (No Election)

Single-member LLC (disregarded entity): You report income and expenses on Schedule C with your personal tax return. Net profit is generally subject to income tax and self-employment tax. You pay yourself with owner draws—no W-2 payroll required.

Multi-member LLC (partnership): The LLC files an informational partnership return. Each member receives a Schedule K-1 showing their share of profit/loss to report on their personal return. Members typically take distributions and may owe self-employment tax on active income.

Pros: Simple bookkeeping, fewer filings, and flexibility with distributions. Cons: Self-employment taxes can be significant once profits rise, and there’s no built-in salary structure for retirement contributions or payroll-based benefits.

When an S-Corp Election May Make Sense

Electing S-corp status can reduce self-employment tax on a portion of your profits. The trade-off: you must run payroll and pay yourself a “reasonable salary” for the work you perform. Profits above that salary can flow through as distributions not subject to self-employment tax (though still subject to income tax).

Consider an S-corp if: (1) Your LLC has consistent profits beyond what you’d pay yourself as a reasonable salary; (2) you’re comfortable with payroll administration and quarterly filings; and (3) the tax savings outweigh payroll software, compliance, and accounting costs.

How to elect: You generally file a federal election to be taxed as an S-corporation. Timing rules apply, and late-election relief may be available. Many owners coordinate with a tax pro or a filing service like LegalZoom to prepare the paperwork and keep deadlines straight.

C-Corp Taxation (Less Common for Small LLCs)

An LLC can also elect C-corp taxation. This can be useful for reinvesting profits, building benefits packages, or planning equity structures. However, dividends can be taxed at the entity and shareholder level. For most small operators, S-corp provides simpler pass-through treatment with potential self-employment tax savings; C-corp is more niche unless you have specific strategic reasons.

How to Pay Yourself Properly

Default taxation (no election): Take owner draws from the business bank account. Set aside funds for quarterly estimated taxes. Track draws separately from expenses—draws aren’t deductible.

S-corp election: Run yourself on payroll for a reasonable salary—what you’d pay someone else to do your job. Use a payroll provider to handle withholdings, filings, and year-end W-2s. Additional profits can be distributed as owner distributions after payroll taxes and operating costs are covered.

Budget for taxes: Even with an S-corp, plan for federal and state income taxes. Keep a separate tax savings account, automate transfers each month, and calendar quarterly due dates so you’re never scrambling.

Simple Decision Steps

  1. Operate under default taxation for the first months while revenue stabilizes and your bookkeeping is clean.
  2. Estimate an annual reasonable salary for your role and forecast profits after that salary, payroll costs, and admin fees.
  3. If profits comfortably exceed your salary plus compliance costs, discuss an S-corp election timeline with a tax professional or use a filing service to prepare the forms.
  4. Implement payroll, adjust your chart of accounts, and set a recurring calendar for payroll runs, quarterly estimates, and year-end filings.
  5. Review annually. If profits drop or your team structure changes, you can reassess whether the election still benefits you.

State and Local Considerations

States differ on LLC fees, franchise/LLC taxes, payroll rules, and city or county business taxes. Confirm whether your state imposes a separate entity-level tax on LLCs or S-corps, and register for state payroll and unemployment accounts if you’ll run payroll. If you sell taxable goods or services, register for sales tax and configure your invoicing or ecommerce platform to collect and remit properly.

Common Tax Mistakes to Avoid

  • Commingling funds: Use a dedicated business bank account and card. Keep owner draws separate from expenses.
  • Skipping payroll on S-corp: Paying only distributions without a reasonable salary can trigger penalties.
  • Late paperwork: Elections, payroll registrations, and quarterly estimates all have deadlines. Build a compliance calendar on day one.
  • Under-withholding: If you’re on payroll, verify withholdings match your tax picture so you don’t owe an unexpected balance at year-end.
  • Ignoring local rules: City taxes, industry licenses, and local permits can apply even if the state requirements look simple.

If you want a done-for-you approach, providers like LegalZoom can help with filings, registered agent service, and the paperwork around tax elections so you can focus on running the business.

Start Your Business

You’re ready to launch—congrats! This is the point where you set pricing, build your website and brand assets, and outline your first 90-day plan for customer acquisition.

You’ve chosen your state, filed your documents, got your EIN, and opened your account. Before you begin, check if your state or city requires specific permits, licenses, sales tax registration, or local filings. Most new LLCs also must file a Beneficial Ownership Information (BOI) report with FinCEN soon after formation; if you’re unsure, confirm your current deadline and exemptions on the official site. LegalZoom offers business license research services and can assist with BOI reporting as well.

Finally, keep your LLC in good standing by maintaining updated records, filing annual reports, and paying required fees. Set an ongoing compliance calendar (annual report, franchise/LLC tax, BOI updates if owners change). Talk with a tax professional about whether an S-corp election makes sense for you—many owners consider it once they have consistent profits—and remember those elections have time windows. Staying organized now can save you major headaches later.