How to Form an LLC: State-by-State Guide and Costs
Step-by-step instructions for forming an LLC - including costs by state, registered agent requirements, operating agreements, and getting an EIN.
An LLC (Limited Liability Company) is the most popular business structure in the United States for good reason: it separates personal assets from business liabilities, offers flexible taxation, and requires less formality than a corporation. Here’s how to form one.
Step 1: Choose Your State
Most businesses should form in their home state - the state where they physically operate. Forming in Delaware or Wyoming to save on fees only makes sense if you have no physical presence anywhere, because you’ll still need to register as a “foreign LLC” in any state where you do business (adding the cost of two registrations instead of one).
When Delaware or Wyoming makes sense:
- You’re a tech startup expecting VC investment (investors prefer Delaware law)
- You have no physical presence in any state (fully online, no employees)
- Privacy is a priority (Wyoming doesn’t require member names on public filings)
Step 2: Choose a Name
Your LLC name must:
- Include “LLC” or “Limited Liability Company” (or an abbreviation)
- Be distinguishable from other business entities registered in the state
- Not include restricted words (Bank, Insurance, University) without special approval
Check availability:
Search your state’s Secretary of State business database online. Most states offer free name searches. Also check:
- Federal trademark database (USPTO TESS) - even if a name is available in your state, it might infringe a trademark
- Domain availability - Secure the .com before filing
- Social media handles - Check major platforms for availability
Name reservation:
Most states let you reserve a name for 60–120 days while you prepare your filing. Fees range from $10–$50.
Step 3: Appoint a Registered Agent
Every LLC must have a registered agent - a person or company designated to receive legal documents (lawsuits, government notices, tax correspondence) on behalf of the LLC.
Requirements:
- Must have a physical street address in the state of formation (not a PO Box)
- Must be available during normal business hours
Options:
- Yourself: Free, but your address becomes public record, and you must be available during business hours
- A friend or family member: Free, but same limitations
- A professional registered agent service: $50–$300/year. Recommended for privacy and reliability.
Popular registered agent services: Northwest Registered Agent ($125/year), Incfile (free first year with LLC formation), ZenBusiness ($199/year with formation package).
Step 4: File Articles of Organization
This is the core document that officially creates your LLC. File with your state’s Secretary of State office.
What’s required:
- LLC name
- Registered agent name and address
- Principal office address
- Organizer’s name and signature
- Member/manager names (some states)
- LLC duration (perpetual is standard)
- Management structure (member-managed or manager-managed)
Most states accept online filing. Processing times range from same-day to 4–6 weeks depending on the state and whether you pay for expedited processing.
LLC Formation Costs by State
| State | Filing Fee | Annual Fee/Tax |
|---|---|---|
| Alabama | $200 | $100 privilege tax |
| Alaska | $250 | $100 biennial |
| Arizona | $50 | $0 |
| Arkansas | $45 | $150/year |
| California | $70 | $800/year franchise tax |
| Colorado | $50 | $10/year |
| Connecticut | $120 | $80/year |
| Delaware | $90 | $300/year |
| Florida | $125 | $138.75/year |
| Georgia | $100 | $50/year |
| Hawaii | $50 | $15/year |
| Idaho | $100 | $0 |
| Illinois | $150 | $75/year |
| Indiana | $95 | $31 biennial |
| Iowa | $50 | $60 biennial |
| Kansas | $160 | $55/year |
| Kentucky | $40 | $15/year |
| Louisiana | $100 | $35/year |
| Maine | $175 | $85/year |
| Maryland | $100 | $300/year |
| Massachusetts | $500 | $500/year |
| Michigan | $50 | $25/year |
| Minnesota | $155 | $0 |
| Mississippi | $50 | $0 |
| Missouri | $50 | $0 |
| Montana | $70 | $20/year |
| Nebraska | $100 | $10 biennial |
| Nevada | $75 | $350/year + $200 business license |
| New Hampshire | $100 | $100/year |
| New Jersey | $125 | $75/year |
| New Mexico | $50 | $0 |
| New York | $200 | $25 biennial + publication ($500–$2,000) |
| North Carolina | $125 | $200/year |
| North Dakota | $135 | $50/year |
| Ohio | $99 | $0 |
| Oklahoma | $100 | $25/year |
| Oregon | $100 | $100/year |
| Pennsylvania | $125 | $70 decennial |
| Rhode Island | $150 | $50/year |
| South Carolina | $110 | $0 |
| South Dakota | $150 | $50/year |
| Tennessee | $300 (min) | $300/year (min) |
| Texas | $300 | $0 (franchise tax applies above $2.47M revenue) |
| Utah | $54 | $18/year |
| Vermont | $125 | $35/year |
| Virginia | $100 | $50/year |
| Washington | $200 | $60/year |
| West Virginia | $100 | $25/year |
| Wisconsin | $130 | $25/year |
| Wyoming | $100 | $60/year (min) |
| DC | $99 | $300 biennial |
Cheapest to form: Kentucky ($40), Arkansas ($45), Arizona ($50), Colorado ($50) Most expensive: Massachusetts ($500), Texas ($300), Tennessee ($300+) Cheapest ongoing: Arizona, Idaho, Minnesota, Mississippi, Missouri, New Mexico, Ohio, South Carolina ($0 annual fee) Most expensive ongoing: California ($800/year franchise tax regardless of income)
Step 5: Create an Operating Agreement
An operating agreement is an internal document that defines:
- Ownership percentages
- Profit and loss distribution
- Member voting rights and procedures
- Management structure (who makes day-to-day decisions)
- Rules for adding or removing members
- What happens if a member leaves, dies, or wants to sell their interest
- Dissolution procedures
Not required in most states (except New York, California, Delaware, Maine, and Missouri), but always recommended. Without one, your state’s default LLC laws govern your business - and those defaults may not match your intentions.
For single-member LLCs, an operating agreement is still valuable: it reinforces the separation between you and the business (important for liability protection) and establishes procedures if you later add members.
Step 6: Get an EIN
An Employer Identification Number (EIN) is your LLC’s tax ID number. It’s free and takes 5 minutes to obtain online at IRS.gov.
You need an EIN if:
- You have employees
- You have more than one member
- You elect to be taxed as an S-Corp or C-Corp
- You open a business bank account (most banks require it)
You might not technically need one if you’re a single-member LLC with no employees - you can use your SSN. But getting an EIN is free, adds a layer of identity protection, and is required for most business banking.
Step 7: Post-Formation Essentials
Open a business bank account
Keep business and personal finances separate. This is critical for maintaining the liability protection an LLC provides. You’ll need your Articles of Organization, EIN, and Operating Agreement.
Get necessary licenses and permits
Depending on your business type and location:
- State business license
- Local/city business license
- Professional licenses (contractors, real estate, healthcare)
- Sales tax permit (if selling taxable goods)
- Home occupation permit (if running from home)
Set up accounting
Use accounting software from day one. QuickBooks, Xero, or Wave. Track every business transaction. This makes tax time easy and supports the legal separation between you and the LLC.
Understand your tax obligations
By default, a single-member LLC is taxed as a sole proprietorship (reported on Schedule C). A multi-member LLC is taxed as a partnership (Form 1065). You can also elect S-Corp taxation (Form 2553) to potentially reduce self-employment taxes once profits exceed $40,000–$50,000.
Common Mistakes
Skipping the operating agreement. Without it, disputes between members have no resolution framework, and a court may apply default rules you didn’t intend.
Not maintaining separation. Using your personal bank account for business expenses, or vice versa, is called “commingling.” It gives creditors grounds to “pierce the corporate veil” and go after your personal assets.
Forgetting annual filings. Most states require an annual report and fee. Miss it, and your LLC can be administratively dissolved - losing your name and liability protection.
Forming in the wrong state. Delaware incorporation makes sense for venture-backed startups. For a local consulting business, it just means paying two sets of fees.
Over-engineering the structure. For most small businesses, a single-member LLC taxed as a sole proprietorship (or S-Corp) is sufficient. You don’t need a holding company, series LLC, or multi-entity structure until your business justifies the complexity and cost.
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