Business Formation: Not sure which structure is right? See our Business Formation Guide for LLC, S-Corp, and C-Corp comparisons.
An LLC (Limited Liability Company) protects your personal assets from business debts and lawsuits while offering flexible tax treatment. It’s the most popular business structure for small businesses, freelancers, and side hustles.
Quick answer: Filing an LLC takes about 30 minutes and costs $35–$500 depending on your state. You’ll need to file Articles of Organization, get an EIN, and create an operating agreement. Most states approve within 1–2 weeks.
How to Start an LLC in 6 Steps
| Step | What to Do | Time | Cost |
|---|---|---|---|
| 1. Choose your state | File in the state where you do business | 5 min | Free |
| 2. Name your LLC | Check availability with your Secretary of State | 10 min | Free |
| 3. Choose a registered agent | Person or service to receive legal documents | 10 min | $0–$125/year |
| 4. File Articles of Organization | Submit formation document to your state | 15 min | $35–$500 |
| 5. Get an EIN | Apply for employer identification number from IRS | 5 min | Free |
| 6. Create an operating agreement | Document LLC ownership and rules | 30 min | Free (DIY) |
LLC Formation Costs by State
| State | Filing Fee | Annual Fee | Total Year 1 |
|---|---|---|---|
| Alabama | $200 | $100 | $300 |
| Alaska | $250 | $100 | $350 |
| Arizona | $50 | $0 | $50 |
| Arkansas | $45 | $150 | $195 |
| California | $70 | $800 (franchise tax) | $870 |
| Colorado | $50 | $10 | $60 |
| Connecticut | $120 | $80 | $200 |
| Delaware | $90 | $300 | $390 |
| Florida | $125 | $138.75 | $263.75 |
| Georgia | $100 | $50 | $150 |
| Hawaii | $50 | $15 | $65 |
| Idaho | $100 | $0 | $100 |
| Illinois | $150 | $75 | $225 |
| Indiana | $95 | $31 | $126 |
| Iowa | $50 | $60 | $110 |
| Kansas | $160 | $55 | $215 |
| Kentucky | $40 | $15 | $55 |
| Louisiana | $100 | $35 | $135 |
| Maine | $175 | $85 | $260 |
| Maryland | $100 | $300 | $400 |
| Massachusetts | $500 | $500 | $1,000 |
| Michigan | $50 | $25 | $75 |
| Minnesota | $155 | $0 | $155 |
| Mississippi | $50 | $0 | $50 |
| Missouri | $50 | $0 | $50 |
| Montana | $35 | $20 | $55 |
| Nebraska | $100 | $13 | $113 |
| Nevada | $75 | $350 | $425 |
| New Hampshire | $100 | $100 | $200 |
| New Jersey | $125 | $75 | $200 |
| New Mexico | $50 | $0 | $50 |
| New York | $200 | $9 | $209 |
| North Carolina | $125 | $200 | $325 |
| North Dakota | $135 | $50 | $185 |
| Ohio | $99 | $0 | $99 |
| Oklahoma | $100 | $25 | $125 |
| Oregon | $100 | $100 | $200 |
| Pennsylvania | $125 | $70 | $195 |
| Rhode Island | $150 | $50 | $200 |
| South Carolina | $110 | $0 | $110 |
| South Dakota | $150 | $50 | $200 |
| Tennessee | $300 | $300 | $600 |
| Texas | $300 | $0 | $300 |
| Utah | $54 | $18 | $72 |
| Vermont | $125 | $35 | $160 |
| Virginia | $100 | $50 | $150 |
| Washington | $200 | $60 | $260 |
| West Virginia | $100 | $25 | $125 |
| Wisconsin | $130 | $25 | $155 |
| Wyoming | $100 | $60 | $160 |
Cheapest states to form an LLC: Montana ($35), Kentucky ($40), Arkansas ($45), Arizona ($50), Colorado ($50)
Most expensive states: Massachusetts ($500), Tennessee ($300), Texas ($300)
LLC vs Other Business Structures
| Feature | Sole Proprietorship | LLC | S-Corp | C-Corp |
|---|---|---|---|---|
| Personal liability protection | No | Yes | Yes | Yes |
| Formation paperwork | None | Simple | Moderate | Complex |
| Formation cost | $0 | $35–$500 | $35–$500+ | $35–$500+ |
| Tax flexibility | No | Yes | Limited | No |
| Self-employment tax | Yes | Yes | Partial | No |
| Ongoing compliance | Minimal | Low | Moderate | High |
| Raising investment | Difficult | Moderate | Moderate | Easy |
| Best for | Side hustles | Most small businesses | Profitable businesses >$50K | Venture-backed startups |
When to Form an LLC
| Situation | Do You Need an LLC? |
|---|---|
| Freelancing/consulting | Yes — protects personal assets |
| Online business/e-commerce | Yes — liability protection for products/services |
| Rental property | Yes — shields personal assets from tenant lawsuits |
| Side hustle under $5K/year | Maybe — sole proprietorship may be fine |
| Practice profession (doctor, lawyer) | PLLC required in most states |
| Partnership with others | Yes — essential for multi-member businesses |
| Uber/Lyft driving | Optional — insurance typically covers liability |
Registered Agent Options
| Option | Cost | Pros | Cons |
|---|---|---|---|
| Yourself | Free | No cost | Your address becomes public record |
| Friend or family | Free | No cost | Must be available during business hours |
| Northwest Registered Agent | $125/year | Privacy, mail forwarding | Annual cost |
| LegalZoom | $249/year | Brand recognition | Higher price |
| ZenBusiness | $199/year | Bundled with formation | Annual cost |
| Incfile | $119/year | Budget option | Basic service |
LLC Tax Treatment Options
One of the biggest advantages of an LLC is tax flexibility. You can choose how you want to be taxed:
| Tax Treatment | Best For | Self-Employment Tax | How to Elect |
|---|---|---|---|
| Sole proprietorship (default for single-member) | New LLCs, low income | Yes — 15.3% on all profit | Automatic |
| Partnership (default for multi-member) | Multiple owners | Yes — 15.3% on all profit | Automatic |
| S-Corp | Profit over ~$50K | Only on “reasonable salary” | File Form 2553 |
| C-Corp | Venture-backed companies | No (but double taxation) | File Form 8832 |
Operating Agreement Essentials
Even in states that don’t require it, you need an operating agreement. Include:
| Section | What It Covers |
|---|---|
| Ownership percentages | Who owns what share of the LLC |
| Capital contributions | How much each member invested |
| Profit/loss distribution | How profits are split (doesn’t have to match ownership) |
| Management structure | Member-managed vs manager-managed |
| Voting rights | How decisions are made |
| Adding/removing members | Process for membership changes |
| Dissolution | What happens if the LLC closes |
| Buy-sell provisions | What happens if a member wants out |
After Formation Checklist
| Task | When | Cost |
|---|---|---|
| Open business bank account | Week 1 | Free |
| Get business insurance | Week 1 | $30–$100/month |
| Set up accounting software | Week 1 | $0–$75/month |
| Apply for licenses/permits | Week 1–2 | Varies |
| File BOI report (Beneficial Ownership) | Within 90 days | Free |
| Register for state taxes | Before first sale | Free |
| Separate personal and business finances | Immediately | Free |
Common LLC Mistakes to Avoid
| Mistake | Why It’s a Problem |
|---|---|
| Mixing personal and business funds | Can “pierce the corporate veil” — losing liability protection |
| Not filing annual reports | State can dissolve your LLC |
| Skipping the operating agreement | Disputes have no resolution framework |
| Forgetting quarterly tax payments | IRS penalties of 0.5% per month |
| Not getting an EIN | Can’t open business bank account or hire employees |
| Filing in Delaware when you operate elsewhere | Still must register in your home state anyway |
Bottom Line
Starting an LLC is one of the simplest ways to protect your personal assets and look professional. For most small businesses, it takes under an hour to file and costs $35–$500 depending on your state. Skip the expensive legal services — you can do it yourself through your Secretary of State’s website.
For related guides, see LLC vs S-Corp, how to start a business, and best accounting software.
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