How to Start an LLC in 2026: Costs, Steps, and Mistakes to Avoid
Forming a Limited Liability Company (LLC) is the most popular way for freelancers, side-hustlers, and small business owners to separate their personal assets from their business. The process is simpler than most people expect: in most states you can go from idea to legal entity in a week or two, for about the cost of a nice dinner out — plus your state’s filing fee. This guide walks through the seven steps, what each one really costs in 2026, and the five mistakes that trip up first-time founders.
What Is an LLC?
An LLC is a business structure that gives you the liability protection of a corporation with the tax simplicity of a sole proprietorship: if the business is sued or can’t pay its debts, your personal savings, car, and home are generally shielded. Profits pass through to your personal tax return, so there’s no separate corporate tax layer for most small LLCs. It’s the default choice for one-person and small-team businesses — and the structure this guide assumes.
How to Start an LLC in 7 Steps
Step 1: Choose the state where you’ll form the LLC
For roughly 95% of small businesses, the right answer is your home state — the state where you live and do business. You’ll see advice online about forming in Delaware, Wyoming, or Nevada for “tax advantages,” but if you operate elsewhere you still owe taxes there, plus you’ll pay extra fees to register your LLC as a “foreign” entity in your home state. Filing fees range from about $35 in Montana to around $500–$520 in Massachusetts, with a national median near $100, so check your own Secretary of State’s website for the exact figure rather than shopping states on price alone.
Step 2: Pick a name and check availability
Your LLC name must include a designator like “LLC” or “Limited Liability Company,” and it must be distinguishable from every other registered business in your state — not identical or confusingly similar. Every Secretary of State site has a free business-name search tool; run your top choices through it before you get attached. If you want to operate under a different brand name than your legal LLC name, you can file a DBA (“doing business as”), which usually costs a small separate fee.
Step 3: Appoint a registered agent
Every LLC must designate a registered agent — a person or company with a physical address in the state who can receive lawsuits, tax notices, and other official mail during business hours. You can serve as your own registered agent for free, but that means your home address goes on public records and you must be reachable all day. Most founders hire a professional service for roughly $50–$300 per year for privacy and peace of mind; many formation services include the first year free.
Step 4: File your Articles of Organization
This is the filing that actually creates your LLC: a short form (usually filed online with the Secretary of State) listing your LLC name, registered agent, business address, and members. You pay the state filing fee at this point, and approval takes anywhere from same-day to a few weeks depending on the state. The paperwork itself is straightforward, but if you’d rather not deal with forms, deadlines, and state-specific quirks, a formation service like Bizee will prepare and file everything for you — you’re paying for convenience and certainty, since the state fee itself is unavoidable either way.
Step 5: Get your EIN from the IRS
An Employer Identification Number (EIN) is the business equivalent of a Social Security number. You’ll need one to open a business bank account, hire employees, and file business taxes. Apply directly on the IRS website — it takes about 15 minutes and is completely free. Never pay a third party for an EIN: some services charge $50 or more for a form the IRS gives away.
Step 6: Create an operating agreement
An operating agreement spells out who owns what percentage of the LLC, how profits and losses are split, how decisions get made, and what happens if a member leaves. Most states don’t require you to file it, but you should still write one — even as a solo founder. It strengthens the legal separation between you and the business (the whole point of the LLC), and banks frequently ask to see it when you open an account. Free templates cover the basics; businesses with partners should consider having an attorney review theirs.
Step 7: Get licenses, a business bank account, and a business phone
With the LLC formed, handle the operational basics: check whether your city, county, or industry requires a business license or permit; open a dedicated business checking account (mixing personal and business money is the fastest way to undermine your liability protection); and set up a professional point of contact. Using your personal cell number on contracts and invoices looks amateurish and blurs the line between you and the business — a business phone system like RingCentral gives you a dedicated business number, auto-attendant, and call handling that works from your existing phone or computer.
What It Costs to Start an LLC in 2026
Here’s a realistic budget. The state filing fee is the only truly mandatory cost; everything else is optional or has a free DIY path.
| Expense | Typical cost | Notes |
|---|---|---|
| State filing fee | $35–$520 | One-time; varies by state (median ~$100) |
| Registered agent | $0 or $50–$300/year | Free if you serve as your own |
| EIN | $0 | Free directly from the IRS |
| Operating agreement | $0–$500+ | Free templates work for simple LLCs |
| Business licenses/permits | $0–$400+ | Varies by city, county, and industry |
| Annual report / franchise tax | $0–$800+/year | Ongoing; e.g., California charges $800/year |
Don’t forget state-specific extras when budgeting: New York requires new LLCs to publish a formation notice in local newspapers (often several hundred dollars), and a handful of states charge annual franchise or privilege taxes regardless of profit. The cheapest possible LLC is just your state’s filing fee; most founders spend a few hundred dollars all-in for year one.
5 Common LLC Mistakes to Avoid
- Forming in the “wrong” state for tax reasons. Unless your business is 100% remote with no physical presence anywhere, forming in Delaware or Wyoming while living in another state just adds foreign-registration fees on top of your home-state obligations. Form where you operate.
- Mixing personal and business money. Paying personal bills from the business account (or vice versa) can let a court “pierce the veil” and hold you personally liable — destroying the protection you paid to create. Open a separate business account on day one.
- Skipping the operating agreement. “It’s just me, I don’t need one” is the most common refrain — right up until a bank asks for it, a dispute arises, or a court questions whether the LLC is really separate from you. Write one; it takes an hour.
- Paying for a free EIN. The IRS issues EINs free in about 15 minutes online. Any service charging you for one is selling you something you can get yourself at no cost.
- Missing annual reports and deadlines. Most states require an annual or biennial report (and fee) to keep your LLC in good standing. Miss it and the state can administratively dissolve your LLC — along with its liability protection. Put every deadline on a calendar the day you form.
Frequently Asked Questions
How long does it take to start an LLC?
Anywhere from same-day to a few weeks, depending on the state and whether you file online or by mail. Online filings in states like Colorado or Wyoming are often approved within 1–3 business days; paper filings and backlogged states can take several weeks. Expedited processing is available in many states for an extra fee.
Do I need a lawyer to form an LLC?
Not for a straightforward single-member LLC — the forms are designed for non-lawyers, and formation services handle the paperwork for a fee. Consider an attorney if you have multiple partners, unusual ownership arrangements, licensed professions, or significant liability exposure.
Can I be my own registered agent?
Yes, in every state, as long as you’re 18 or older, have a physical street address in the state (not a P.O. box), and are available during normal business hours. The trade-offs are privacy (your address becomes public record) and availability — miss a service of process and you could lose a lawsuit by default.
Does an LLC save me money on taxes?
Not automatically. By default, a single-member LLC is taxed exactly like a sole proprietorship — profits flow to your personal return. The real tax benefit is flexibility: once profitable, an LLC can elect S-corp taxation, which can reduce self-employment taxes. Talk to a CPA about whether and when that election makes sense for your numbers.
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Disclaimer
This article is for general educational purposes only and is not legal, tax, or financial advice. LLC laws, fees, and filing requirements vary by state and change over time — verify current rules with your Secretary of State’s office and the IRS before filing. For advice about your specific situation, consult a licensed attorney or CPA.