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How to Set Up an LLC in the US: A Step-by-Step Guide for Founders

AirCounsel Team
18/11/2025
16 min read
How to Set Up an LLC in the US: A Step-by-Step Guide for Founders

If you’re asking “how do I set up an LLC?” you’re already ahead of many would‑be founders. Choosing the right structure early can protect your personal assets, simplify taxes, and make hiring and fundraising easier.

Over 36 million small businesses operate in the US and create about 90% of net new jobs, according to the Small Business Administration, underscoring how common and important proper business formation has become for entrepreneurs.
An LLC (limited liability company) is the go‑to choice for many of them because it blends liability protection with flexible, founder‑friendly tax options.

This guide walks you through exactly how to set up an LLC in the USA, step by step, plus costs, timelines, common mistakes, and when it’s worth bringing in an attorney.

Table of Contents

Quick Summary

TakeawayExplanation
An LLC separates business and personal assetsWhen respected properly, an LLC can shield your home, car, and savings from most business debts and lawsuits.
You form an LLC at the state levelYou must file “Articles of Organization” (or similar) with your chosen state and pay a filing fee. Rules and costs differ by state.
Core steps are similar in every stateChoose a state, pick a name, appoint a registered agent, file formation documents, create an operating agreement, get an EIN, then handle licenses and compliance.
Typical filing fees range from about $35–$500The average one‑time state filing cost to form an LLC is roughly $132, but some states are much higher.
An operating agreement is critical, even for one ownerThis internal contract governs ownership, decision‑making, and profit splits—and helps preserve your liability protection.
Ongoing compliance is not optionalAnnual reports, franchise taxes, and proper bookkeeping keep your LLC in good standing and your liability shield intact.

What Is an LLC and Is It Right for You?

A limited liability company (LLC) is a state-created business entity that protects its owners (called “members”) from most personal liability for business debts and obligations. The IRS describes an LLC as a business structure allowed by state statute, with flexible tax classification options and member‑level liability protection in most scenarios.
See: IRS overview of LLCs.

In plain English, that means:

  • Your business is a separate legal entity.
  • Creditors and plaintiffs usually can’t go after your personal assets for business obligations.
  • Profits and losses can “pass through” to your personal tax return, avoiding corporate double taxation (unless you elect corporate treatment).

An LLC is often a strong fit if:

  • You’re a solo founder or lean founding team.
  • You want liability protection but don’t need a complex corporate structure yet.
  • You want simple, flexible taxation with the option to elect S‑corp or C‑corp treatment later.
  • You plan to bring on independent contractors, employees, or partners.

If you’re aiming for venture funding in the near future, a corporation may make more sense long‑term—but many founders still start as an LLC, then convert once they have traction.

Overview: 7 Steps to Set Up an LLC

At a high level, here’s how to set up an LLC in the US:

  1. Choose your state.
  2. Pick and clear your LLC name.
  3. Appoint a registered agent.
  4. File Articles of Organization with the state.
  5. Create an LLC operating agreement.
  6. Get an EIN and set up business finances.
  7. Handle licenses, tax registrations, and ongoing compliance.

Let’s go step by step.

Step 1: Choose Your State

Most founders should form their LLC in the state where they actually operate day‑to‑day (where you work, have an office, or have employees).

Forming in a “popular” state like Delaware, Wyoming, or Nevada sounds appealing, but for a small business it often means:

  • Paying formation and annual fees in that state and
  • Registering as a “foreign LLC” and paying fees again in your home state

That’s double the paperwork and double the cost, with no real benefit for most local businesses.

Consider forming outside your home state only if:

  • You have real, multi‑state operations, or
  • You’re a non‑US founder with no US “home” state and a specific tax/strategic reason.

Step 2: Pick and Check Your LLC Name

Every state has its own naming rules, but in general your LLC name must:

  • Be distinguishable from existing business names in that state.
  • Include a designator like “LLC,” “L.L.C.,” or “Limited Liability Company.”
  • Avoid restricted words like “bank,” “insurance,” or “university” unless you’re properly licensed.

Practical process:

  • Search your state’s business name database (usually on the Secretary of State website).
  • Check domain availability and key social handles.
  • Run at least a basic trademark search using the USPTO’s trademark database to reduce the risk of infringing someone else’s brand.

If the name is key to your brand long‑term, consider a professional Trademark Search and later Trademark Filing to lock it down.

Step 3: Appoint a Registered Agent

A registered agent is your LLC’s official “legal mailbox”—the person or company designated to receive lawsuits, government notices, and official mail.

Requirements vary slightly, but typically your registered agent must:

  • Be an adult individual or a registered business in the state.
  • Have a physical street address in that state (no PO boxes).
  • Be available during normal business hours.

Your options:

  • You or a co‑founder (if you live in the state and are okay with your address being public).
  • A professional registered agent service, usually $50–$200/year, useful if you:
    • Work from home and don’t want your home address online.
    • Travel frequently and can’t reliably receive service of process.
    • Operate in multiple states.

Step 4: File Your Articles of Organization

This is the core legal step that actually forms your LLC.

You’ll typically file:

  • “Articles of Organization”
  • Or “Certificate of Formation/Organization” (name varies by state)

You file with the Secretary of State (or equivalent), usually online. The form is shorter than most people expect. It often asks for:

  • LLC name and principal address
  • Registered agent name and address
  • Management structure (member‑managed vs. manager‑managed)
  • Name and signature of the organizer (the person submitting the filing)

Once the filing is accepted, your LLC is legally born.

Many founders pair this step with attorney support through a formation service like Entity Formation Services so the structure is set up correctly from day one.

Step 5: Create an LLC Operating Agreement

An operating agreement is the internal contract that governs how your LLC actually works. It typically covers:

  • Who owns what percentage
  • How profits and losses are split
  • Who manages the business and how decisions are made
  • What happens if a founder leaves, dies, or wants to sell their interest
  • Procedures for admitting new members and resolving disputes

Even if your state does not legally require one, a written operating agreement is crucial because it:

  • Shows you treat the LLC as a real, separate entity (which helps preserve liability protection).
  • Prevents future fights by documenting expectations now.
  • Overrides default state rules that might not fit your situation.

For single‑member LLCs, it still matters. It documents your intent to create and respect a separate entity and clarifies how the business is run if you’re ever incapacitated or your estate needs to manage the company.

If you want a robust, state‑specific agreement rather than a generic template, consider a custom LLC Operating Agreement drafted by a US‑licensed attorney.

Step 6: Get an EIN and Set Up Finances

An EIN (Employer Identification Number) is your business’s federal tax ID, issued by the IRS.

You generally need an EIN if:

  • You have (or will have) employees.
  • You have more than one member.
  • You want a business bank account (most banks require it).
  • You elect to be taxed as a corporation.
  • You want to avoid using your SSN with vendors and clients.

You can obtain an EIN for free directly from the IRS using their online application:
See: IRS EIN application.

Next, separate your finances:

  • Open a business checking account in the LLC’s name.
  • Route all business income into that account.
  • Pay all business expenses from that account.
  • Do not pay personal expenses from your business account (and vice versa).

Clean separation is critical to preserving your liability shield and simplifying taxes.

Step 7: Handle Licenses, Taxes, and Ongoing Compliance

Forming an LLC is not the last step. You still need to ensure you can legally operate and stay in good standing.

Key items to address:

  • State and local business licenses
    • City business license, county permits, zoning approvals.
    • Industry‑specific licenses (e.g., contractors, restaurants, medical practices).
  • State tax registrations
    • Sales tax permits if you sell taxable goods or services.
    • State employer accounts if you have payroll.
  • Annual reports and franchise taxes
    • Many states require an annual (or biennial) report plus a fee.
    • Some states (like California) require a minimum annual LLC tax regardless of profit.

Check your Secretary of State and state Department of Revenue sites for specific requirements in your state. Missing filings can lead to late fees, suspension, or even administrative dissolution.

How Much Does It Cost and How Long Does It Take?

Costs vary by state, but here’s a practical ballpark.

ItemTypical Range (One LLC, One State)
State filing fee (Articles of Organization)About $35–$500; national average around $132 to form an LLC, depending on your state
Registered agent (if you use a service)$50–$200/year
Attorney‑guided formation / operating agreementA few hundred to a few thousand dollars, depending on scope and complexity
Annual report / franchise tax$0–$800+ per year, depending on the state

(Filing fee average based on publicly compiled state fee data, such as the cost guide from LLC University.)

Timelines:

  • Online state filing: often same day to 7 business days.
  • Mail filing: can be 1–4 weeks.
  • EIN from IRS: usually immediate via online application.
  • Licenses and permits: from a few days to several weeks, depending on agency backlog.

Attorney‑led services like Entity Formation Services can often coordinate these pieces in parallel to get you to “launch‑ready” status faster.

Common Mistakes When Setting Up an LLC

Founders rarely get tripped up by the form itself—it’s everything around it. Here are mistakes that cause the most pain later.

  • Forming in the “wrong” state
    Chasing Delaware/Wyoming hype when you’re a purely local business can mean double registrations, double fees, and more complexity, with no real benefit.

  • Skipping the operating agreement
    Or using a template that doesn’t match your state or your deal. This is a major source of co‑founder disputes and confusion over who owns what.

  • Commingling money
    Using one bank account for business and personal can undermine your liability shield and make tax time a nightmare.

  • Ignoring tax elections
    By default, a single‑member LLC is taxed like a sole proprietor and a multi‑member LLC like a partnership. That’s fine for many, but some founders benefit from electing S‑corp treatment. The IRS explains default and elective classifications here: LLC taxation options.

  • Missing state follow‑ups
    Many states require an initial report or statement within 60–90 days of formation, plus ongoing annual reports. Missed deadlines lead to penalties and loss of good standing.

  • Not addressing founder exit scenarios
    No one wants to plan for breakups, but failing to document buyouts, vesting, or what happens if a member dies or disappears can cripple the business later.

Practical Tips to Get It Right the First Time

A few practical moves can save you time, money, and stress:

  • Clarify your goals first
    Are you building a lean lifestyle business, a scalable services company, or an eventual venture‑backed startup? That answer informs the best structure and tax elections.

  • Map ownership and roles before filing
    Don’t wait until after you file to argue about equity splits or decision‑making authority. Capture it in your operating agreement from day one.

  • Document capital contributions
    Whether it’s cash, equipment, or IP, record what each member is contributing and how it converts into ownership.

  • Treat your LLC like a real company from day one
    Separate accounts, basic bookkeeping, written resolutions for major decisions, and appropriate insurance all support your liability protection.

  • Plan your tax strategy early
    Talk to a tax advisor or use Ask a U.S Attorney a Question if you’re unsure how to classify the LLC for tax purposes or when to consider an S‑corp election.

  • Think a step ahead on contracts
    Once your LLC exists, your key relationships (clients, contractors, partners) should be under clean, LLC‑level contracts, not personal emails or handshake deals. Attorney‑drafted documents via Custom Contract Drafter can tighten this up.

Should You DIY or Use an Attorney-Led Service?

You can absolutely file an LLC yourself. Many founders do.

DIY is more realistic if:

  • Your business is simple (single‑member, one state, straightforward activity).
  • You’re comfortable reading state instructions and IRS materials.
  • You have time to chase down licensing and compliance details.

That said, the risk isn’t usually “can I fill out the form?”—it’s “did I structure this correctly?”

Using an attorney‑led service is often worth it if:

  • You have co‑founders or outside investors.
  • You expect to grow quickly, hire employees, or raise capital.
  • You want a custom operating agreement instead of a generic template.
  • You prefer predictable, fixed pricing over unknown cleanup costs later.

A good formation partner doesn’t just “file paperwork”; they help you:

  • Choose a suitable state and structure.
  • Align ownership, voting, and economics with your actual deal.
  • Set up compliance systems so you don’t lose good standing.

How AirCounsel Can Help You Form Your LLC

Attorney guiding a founder through LLC setup on a laptop in a modern workspace

If you’d rather not gamble your structure on templates and guesswork, AirCounsel connects you with US‑licensed attorneys on transparent, fixed‑fee packages tailored to entrepreneurs.

With Entity Formation Services, you get:

  • Attorney‑guided entity choice (LLC vs. corporation, and which state)
  • Preparation and filing of formation documents
  • EIN support and basic compliance templates
  • A focused consultation to answer your “what about my situation?” questions

To lock in clear internal rules, you can pair that with a custom LLC Operating Agreement, drafted specifically for your ownership structure, state law, and goals—no generic boilerplate.

If you just need quick clarity before you decide, use Online Consultation or Ask a U.S Attorney a Question to get targeted guidance without a big‑firm bill.

Frequently Asked Questions

Do I need a lawyer to set up an LLC?

No—most states let you file online without an attorney. But a lawyer adds value on structure, not just forms: ownership splits, decision‑making, tax elections, and future investor‑readiness. Many founders DIY the filing and then pay more later to fix foundational mistakes.

How do I set up an LLC if I’m the only owner?

The steps are the same: choose your state, pick a name, appoint a registered agent, file Articles of Organization, create a single‑member operating agreement, get an EIN, and set up a business bank account. Even as a solo owner, you should still have a written operating agreement and separate finances to maintain liability protection.

Can I use my home address for my LLC?

Often yes, especially for home‑based businesses, but it becomes part of the public record. If privacy or zoning is a concern, consider using a coworking address (if permitted), virtual office, or registered agent address where allowed, and confirm your city or HOA rules for running a business from home.

What taxes does an LLC pay?

By default, the LLC itself is usually not taxed at the federal level; profits “pass through” to the members’ personal returns. Single‑member LLCs are typically taxed like sole proprietors; multi‑member LLCs like partnerships. You may also owe state income tax, state LLC/franchise taxes, and employment taxes if you have payroll. You can elect corporate or S‑corp treatment if it’s advantageous.

Can I change my LLC to a corporation later?

In many states, yes. You can convert an LLC to a corporation, but it involves filings and potential tax consequences. If you anticipate raising venture capital, talk to a lawyer early so your LLC is structured in a way that’s easier to convert cleanly when the time comes.

What happens if I don’t file annual reports or pay state fees?

Your LLC can fall out of good standing, incur penalties, lose the right to sue in state courts, and eventually be administratively dissolved. In extreme cases, losing good standing can also weaken your liability shield. Calendar your deadlines as soon as you form the LLC.

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