How To Start An LLC (2026)

What an LLC Is and How It Works

First, what is an LLC? This uniquely flexible business structure combines elements of both corporations and partnerships:

• Like a corporation, it’s a separate legal entity from the owner and therefore limits their liability.
• Like a partnership, it offers pass-through taxation.

With pass-through taxation, your company doesn’t pay taxes as a business entity. Instead, income passes through the LLC to you (and any other owners). LLC owners then pay personal income taxes on that money.

Benefits of Starting an LLC

These are some of the key benefits of an LLC:

• Your personal assets are generally shielded from business-related debts.
• LLC owners may manage the company themselves or hire an outside manager.
• You only pay taxes at an individual level, not at a business level.
• LLCs are subject to fewer regulations than corporations.

Establishing a business as an LLC can also give you more credibility. That’s because LLCs are more formal than partnerships or sole proprietorships.

Disadvantages of an LLC

Before you create an LLC, you should also consider potential drawbacks:

• LLCs come with more fees than most partnerships or sole proprietorships.
• They often have ongoing compliance obligations (like annual reports).
• Transferring ownership of an existing LLC can be complex.

If you’re creating a company that you want to eventually go public, an LLC may not be the best choice. To issue stock to investors, your company must be a corporation.

How to Create an LLC

Fortunately, setting up an LLC isn’t quite as complicated as creating a corporation, but there are several administrative tasks you’ll need to complete first:

Choosing Your Formation State

The requirements for creating an LLC can vary widely from state to state. Before you decide where to open yours, make sure you thoroughly understand your state’s requirements. You should be able to find them on your state’s Secretary of State website.

Choosing a Name for Your LLC

Once you’ve decided where to open your LLC, you’ll need to select a name. Each state has its own naming rules, but generally, you’re required to choose a unique name and include “LLC” or “Limited Liability Company” at the end.

Appointing a Registered Agent

Your LLC’s registered agent is a person who receives important legal documents on behalf of your company. Registered agents might receive pieces of correspondence like these:

• Summons and complaint informing the company that it’s being sued
• Wage garnishment forms
• Annual report reminders and other mailings from the Secretary of State
• Legal notices like subpoenas
• Tax documents

There’s nothing wrong with serving as the registered agent for your own LLC. However, mishandling critical documents could land your company in legal trouble. Many LLC owners work with registered agent service providers instead.

Filing Your Articles of Organization

Most states have their own standard forms for articles of organization. These forms will usually ask for the following:

• The name of your LLC
• Its main location
• The main purpose of the business
• The name and address of the LLC’s registered agent
• Whether the company will be managed by the owner(s) or an outside party

Once you send your articles of organization and the state approves them, you should receive a certificate that legally proves the business’s status as an LLC.

Writing an LLC Operating Agreement

Most states don’t actually require you to file your LLC operating agreement. However, this internal document is critical. For LLCs with multiple members, an operating agreement can help you avoid disputes.

Having an operating agreement is important even if you have a single-member LLC. The agreement shows that you recognize the LLC as a separate legal entity from yourself, which can help you avoid piercing the corporate veil.

If a court of law sees that you haven’t properly treated the business as a separate entity, it can “pierce the corporate veil” and hold you personally responsible for business liabilities.

Getting an EIN and Business Bank Account

Even if your LLC won’t have employees, you still need an employer identification number (EIN) to file taxes and open a business bank account. You can get an EIN from the IRS online in minutes.

Licenses, Permits, and Ongoing Compliance

Some states and industries have additional requirements. For example, if your LLC is a financial advisory firm, your advisors will still need to be licensed individually. Some states and localities require all or most LLCs to obtain business licenses.