A Limited Liability Company (LLC) combines both:
- Limited liability protection of a corporation
- Tax flexibility of a partnership
In fact, LLC profits can be taxed as the owner’s personal income. It offers a more straightforward approach to taxation. It is no wonder that lots of businesses in the United States have chosen the LLC structure. Nowadays, you can even consider filing an LLC online. However, you, as a newbie, might not be aware of the process to start an LLC. So, here is the guide that will help you set up an LLC in 2026 with confidence.
1. Choose The Right State
When it comes to forming an LLC, it is not about choosing a state like Delaware or Nevada where there are lots of tax perks. The best state to form an LLC is the one where you actually do business.
Here is why: Most states require businesses to register as “foreign LLCs” if they operate there but were formed in another state.
This means:
- More paperwork
- Extra fees
- Added compliance
Some states, like Wyoming, Delaware, and Nevada, offer stronger privacy protections for LLC owners. Consider these states if privacy is a top priority for your business.
It is important to note that enhanced privacy may entail additional compliance costs.
2. Select a Unique, Compliant Business Name
Make sure that when you are choosing a name for your LLC, it follows your state’s rules.
Most states require that your LLC name include “LLC” or “Limited Liability Company”. Don’t use certain restricted words like “bank,” “insurance,” or “trust” unless you get special permission.
Make sure the name is available before you consider it. Each state has its own business registry. You will need to check with your Secretary of State’s website to see if the name is taken. Some states also let you reserve a name for a small fee while you finalize your LLC formation.
Watch out for common naming mistakes:
- Picking a name that is too similar to an existing business
- Using restricted words without permission
- Overlooking trademark issues
It is always worth double-checking to avoid expensive legal headaches later on.
3. Appoint a Registered Agent
It is the person or company that receives important legal documents on behalf of your business. It is a legal requirement in every state, and it is more crucial than many entrepreneurs realize. Your registered agent is the go-to contact for things like:
- Lawsuits
- Tax notices
- Government letters
- Official documents
You could unintentionally lose a legal case by default if you miss a delivery from your registered agent. It can even result in penalties.
You have three options when it comes to choosing a registered agent:
- Serve as your own registered agent: You can act as your own agent if you have a physical address in the state where your LLC is formed. Your personal name and address will be listed in public records, which could affect your privacy.
- Designate an employee or business partner: This works for some businesses. You will be left without a reliable contact if that person leaves the company or becomes unavailable.
- Hire a professional registered agent service (recommended): Your personal information stays private. They track of incoming documents and notify you immediately when something important arrives. One registered agent can manage all your state requirements for you if your LLC operates in multiple states.
4. Draft Your Operating Agreement
This is where many entrepreneurs trip up. The cost of mistakes can really add up. An operating agreement is a private legal document that outlines how your LLC runs. It covers:
- How profits and losses are divided
- How decisions are made
- What happens if a member leaves, disagrees with others, or passes away
What It Means For:
Single-member LLCs
The Court may still require an operating agreement to show that you are treating your LLC as a separate entity. Without it, the court could see your LLC as just an extension of yourself. This opens the door for them to pierce your liability shield.
Multi-member LLCs
An operating agreement is absolutely critical. It should cover:
- Membership percentages and capital contributions: Who owns what share of the business and who invested what.
- Decision-making authority: What decisions need unanimous consent, and which ones can be made by majority vote.
- Profit and loss distribution: How the profits (and losses) are shared. This can be different from ownership percentages.
- Member Withdrawal or exit procedures: What happens if someone wants to leave the business.
- Conflict resolution: How disputes between members will be handled.
- Death or disability provisions: What happens if a member becomes disabled or passes away.
Courts take operating agreements seriously. It is important to consider an attorney-reviewed operating agreement that can save you big headaches in the future.
5. File Your Articles of Organization
Register your LLC with your state by filing your Articles of Organization. This is the document that makes your LLC a legal entity. Most states offer a standard form that asks for basic information, like:
- Your LLC’s name
- Registered agent details
- Business address
- Business purpose
- Management structure (whether it is member-managed or manager-managed)
- Number of shares
- Board of directors
- Incorporator details
You can usually file this document online through your Secretary of State’s website.
6. Select Your Management Structure
Choose how your LLC will be managed: member-managed or manager-managed.
Member-Managed
All members are directly involved in daily business decisions. This is suitable for most small businesses where the owners actively run the operations.
Manager-Managed
Members choose one or more managers to make operational decisions. This structure works better for larger LLCs, LLCs with passive investors, or situations where you want to separate ownership from management.
7. Obtain an Employer Identification Number (EIN)
You can get an EIN for free. The process takes just a few minutes. You can apply online on the IRS website.
You can also use services that help you get a federal tax ID (EIN) with ease. The process is simple:
- File an easy online questionnaire
- Specialists complete Form SS-4 and submit it directly to the IRS
- Receive your official EIN from the IRS
8. Make Your Tax Election
The IRS doesn’t tax LLCs directly. They tax the members. You can choose a different tax treatment if it makes sense for your business. Here are your options:
Disregarded Entity: Standard for a single-member LLC
S-Corporation Election: You can save self-employment taxes if you have higher profits. You have to file Form 1120-S annually.
C-Corporation Election: It makes sense for growth-stage companies.
9. Open a Dedicated Business Bank Account
Open a business bank account using your EIN and use it only for business transactions. Get a business credit card for business expenses only.
10. Obtain Required Licenses and Permits
Here is what you might need before you can start doing business:
- General Business License
- Sales Tax Permit
- Professional Licenses
- Industry-Specific Permits
- Zoning Permits
You can even consider services that help get the business licenses you need without wasting any time and energy. They identify the licenses and permits your business needs by state, city, and industry. They give you a straightforward roadmap of licenses tailored to your business.
Conclusion
You can start an LLC in 2026 easily with the right steps, including choosing the right state, name, obtaining licenses, and making tax elections. You can even consider the LLC formation services for detailed guidance and professional help.
