Setting up an LLC in 2026 is one of the most durable decisions you can make for a new business. It separates your personal assets from your business, gives you a flexible tax structure, and costs less than most people expect — typically $50 to $500 in filing fees, depending on the state, plus annual reports that run anywhere from $20 to $800. This is the step-by-step guide for actually doing it right: choosing a state, picking a name that won’t get rejected, appointing a registered agent, filing the articles of organization, writing an operating agreement, getting an EIN, and handling the ongoing compliance work that keeps the LLC in good standing.

Step 1: Pick the right state to form in

For most small businesses, the answer is simple: form your LLC in the state where you live and do business. The “form in Delaware” or “form in Wyoming” advice circulating on social media is pointed at specific use cases — venture-backed startups with complex capital stacks or real estate holding companies — and doesn’t apply to a typical single-owner or small-team LLC.

If you form an LLC out of state and operate from your home state, you will need to register the out-of-state LLC as a “foreign LLC” in your home state. That means paying filing fees and annual reports in both states, plus maintaining a registered agent in both. For a business that is not specifically structured around out-of-state filing benefits, that’s extra cost and paperwork for nothing.

Exceptions where out-of-state formation can make sense: (1) real estate LLCs that own property in multiple states can benefit from Wyoming or Delaware holding company structures, (2) startups planning to raise venture capital almost always form in Delaware because investors and their counsel expect it, (3) anonymity-focused LLCs sometimes form in Wyoming or New Mexico, which allow unnamed members in public filings.

Step 2: Pick an available LLC name

Every state requires LLC names to be distinguishable from existing entity names on file. Search the secretary of state’s business entity database in your formation state before committing. Most states maintain a free search tool — for example, Florida’s Sunbiz or the California bizfile portal.

State naming rules almost always require:

  • The name to include “LLC,” “L.L.C.,” or “Limited Liability Company”
  • The name to be distinguishable from other entities registered in the state (not just not identical — “distinguishable” is a higher bar)
  • The name to avoid restricted words (bank, insurance, university) without additional licensing
  • The name to avoid words implying an unlicensed professional service (law firm, attorney, CPA) without meeting professional-LLC requirements

Check the federal trademark database at USPTO.gov while you’re at it. A name that’s available with the secretary of state can still be a trademark infringement waiting to happen if a national business already owns the brand federally. Domain availability matters too — many LLC founders lock in the .com or preferred domain before filing so the name on the articles matches the brand they are actually going to use.

Step 3: Appoint a registered agent

Every LLC is required to have a registered agent — a person or service with a physical address in the formation state who accepts legal service of process during business hours. You can be your own registered agent if you have a physical address in the state (not a P.O. box) and are regularly available during business hours. Using yourself saves $100 to $200 per year in registered agent fees, but the tradeoff is that process servers can show up at your home or office, and your personal name and address become public record.

Commercial registered agent services are standard and affordable. Northwest Registered Agent, Harbor Compliance, Rocket Lawyer, and ZenBusiness all run in the $100 to $250 per year range. The key reasons to use a service: privacy (your home address stays off public records), reliability (you don’t miss a service of process because you were on vacation), and mail scanning (many services forward or scan documents so you can respond remotely).

Step 4: File articles of organization

This is the step where the LLC legally comes into existence. You file the articles of organization (some states call it a “certificate of formation”) with the secretary of state in your formation state. The filing is almost always available online. Fees vary widely: Kentucky is $40, California is $70, Massachusetts is $500, and Tennessee can be over $300 depending on the number of members.

Articles of organization typically require:

  • The LLC name
  • The registered agent’s name and address
  • The principal office address
  • Whether the LLC is member-managed or manager-managed
  • Names of initial members or organizers (some states only require the organizer — the person filing — to be named)
  • Effective date (today or a future date)

Most states approve online filings within 3 to 10 business days. Some offer expedited processing for an additional fee. Once approved, you’ll receive a filed copy of the articles along with a certificate of formation or certificate of good standing.

Step 5: Write an operating agreement

An operating agreement is the internal document that governs how the LLC runs — how members split profits, how decisions get made, what happens if a member leaves, and how the LLC can be dissolved. Only a handful of states legally require one (California, New York, Missouri, and a few others), but every single-member and multi-member LLC should have one.

For single-member LLCs, the operating agreement serves two important non-intuitive functions: (1) it helps preserve the limited liability shield by documenting that the LLC is a separate legal entity with its own governance, and (2) it gives banks, investors, and counterparties something to look at during due diligence. Without one, courts in some jurisdictions have been more willing to “pierce the veil” and treat a single-member LLC as a sole proprietorship.

For multi-member LLCs, the operating agreement is essential. It answers the questions that blow up co-owned businesses: what happens when a member dies, gets divorced, wants to leave, or stops pulling their weight. The agreement should cover capital contributions, distributions, voting thresholds, member buyouts, dissolution procedures, and dispute resolution.

Template operating agreements are freely available, but an attorney review for multi-member LLCs — usually $300 to $1,500 — is one of the best-value legal expenditures a new business can make.

Step 6: Get an EIN from the IRS

An Employer Identification Number is the federal tax ID for your LLC. Even single-member LLCs with no employees generally need one to open a business bank account. The EIN is free, takes about 15 minutes, and is obtained directly from the IRS at irs.gov. The online application issues the EIN instantly at the end.

Do not pay a third-party service for an EIN. The IRS issues them directly and at no cost. Services charging $50 to $300 for “EIN filing assistance” are simply reselling a free government service, often with the same data the applicant could enter themselves in less time.

Step 7: Open a business bank account

Opening a dedicated business bank account in the LLC’s name is how you preserve the limited liability protection the LLC is supposed to provide. Commingling personal and business funds — paying personal expenses out of the business account or vice versa — is a primary basis for courts to disregard the LLC’s separate legal existence and allow creditors to reach personal assets.

Bring the filed articles of organization, the EIN confirmation letter, and the operating agreement to the bank. Most banks will open the account on the spot. Compare monthly fees and minimum balance requirements — fintech business accounts (Mercury, Bluevine, Relay) often have no monthly fees and better interfaces, while traditional banks offer cash deposit convenience and lending relationships.

Step 8: File for state and local tax registrations

Depending on the nature of the business and the state, additional registrations may be required:

  • Sales tax permit: required if you sell taxable goods or services in the state
  • Employer registration: state-level employer ID for payroll taxes if you will hire employees
  • Professional licenses: required for regulated industries (food service, contracting, real estate, healthcare, etc.)
  • Local business license: many cities and counties require a local license or occupational tax certificate
  • DBA filing: if you will operate under a name different from the LLC’s legal name

The state’s “starting a business” portal (most states have one) walks through the applicable registrations.

Step 9: Meet the BOI reporting requirement — if it applies

The Corporate Transparency Act’s Beneficial Ownership Information (BOI) reporting requirement has had an uncertain status over the past year due to federal court litigation. As of early 2026, FinCEN has limited BOI reporting requirements to foreign-owned entities under interim rules, but the legal status continues to evolve. Check fincen.gov/boi for the current reporting status before assuming you don’t need to file.

Step 10: Stay in good standing

After formation, the LLC needs to stay current on annual or biennial filings to remain in good standing:

  • Annual report: most states require an annual or biennial report with a small fee ($20 to $800 depending on state). Miss enough of these and the state will administratively dissolve the LLC.
  • Franchise tax: states like California, Delaware, and Texas charge a minimum franchise tax regardless of revenue. California’s $800 annual tax catches many first-time LLC owners off guard.
  • Federal tax filings: single-member LLCs file on Schedule C of the owner’s personal return by default. Multi-member LLCs file Form 1065 and issue K-1s. LLCs that elect S-corp taxation file Form 1120-S. The tax default is not always optimal; consult a CPA before the first tax year closes.
  • Registered agent: maintain a current registered agent. If the agent resigns, appoint a new one immediately.

The real-world total cost to start an LLC

For a typical single-member LLC formed in a moderate-cost state, the first-year expenses look roughly like this:

  • Articles of organization filing: $50 to $300
  • Registered agent (if using a service): $100 to $250
  • Operating agreement (template or DIY): $0 to $100
  • EIN: $0 (free from IRS)
  • Business license and local permits: $0 to $500 depending on city and industry
  • Annual report (first filing usually due in year 1 or 2): $20 to $800

That puts the typical first-year cost between $170 and $1,950. Costs for multi-member LLCs or LLCs in high-fee states (California, Massachusetts, Tennessee) can run significantly higher.

Common mistakes that cost new LLC owners money

  • Using the wrong tax classification. Default tax treatment is not always best. An S-corp election for an LLC earning over $50,000 in net profit can save thousands in self-employment tax. Evaluate before the first tax year ends.
  • Commingling funds. Keep personal and business spending completely separate. Use the business card for business expenses and the personal card for personal ones, period.
  • Skipping the operating agreement. Especially for multi-member LLCs, the absence of an operating agreement is a disaster waiting to happen when one of the members wants out.
  • Forgetting annual reports. Many states administratively dissolve LLCs that miss two consecutive annual reports. Restoration is possible but time-consuming and expensive.
  • Over-investing in forming in Delaware or Wyoming. For a typical small business, those states cost more and provide no real benefit.

Frequently asked questions

How long does it take to set up an LLC?

Most states approve LLC filings within 3 to 10 business days of submission. Some offer same-day expedited filing for an additional fee. Gathering the EIN, operating agreement, and business bank account typically adds another week. A realistic total from decision to operational LLC is two to three weeks.

Do I need a lawyer to form an LLC?

For a single-member LLC with straightforward operations, no — the state’s online filing portal and standard templates are sufficient. For multi-member LLCs, LLCs with outside investors, professional practices, or businesses in regulated industries, attorney review of the operating agreement and initial structure is worth the $300 to $1,500 fee.

Should I form my LLC in Delaware or Wyoming even if I live elsewhere?

Usually no. For typical small businesses, forming out of state creates a foreign LLC registration requirement in your home state, effectively doubling filing and compliance costs. Delaware formation makes sense for venture-backed startups; Wyoming is popular for real estate holding structures. For the common small business, form in the state where you live and operate.

What’s the difference between member-managed and manager-managed?

In a member-managed LLC, all owners participate in running the business. In a manager-managed LLC, the owners appoint one or more managers (who may or may not be owners) to handle day-to-day operations, while non-manager members take a more passive role. Most small business LLCs are member-managed. Manager-managed structures are more common when there are passive investors.

Can I set up an LLC online without using a formation service?

Yes. Every state’s secretary of state website offers direct online filing. Formation services like LegalZoom, ZenBusiness, and Incfile package the same filing with registered agent service and templates, usually for $0 to $300 plus state fees. If you’re comfortable with paperwork and will handle your own registered agent, direct filing is cheaper. If you want registered agent service and document templates bundled in, a formation service can be reasonable.

This article is general legal and business information, not legal or tax advice. State LLC rules and federal tax rules change, and the right structure for a particular business depends on specific facts. Consult a licensed attorney and a qualified CPA before finalizing your LLC structure and tax elections. The Complete Lawyer is an independent publisher and has no affiliation with any state agency, the IRS, or FinCEN.