Starting a business is an exciting and rewarding venture, and one of the first steps many entrepreneurs take is forming an LLC (Limited Liability Company). An LLC is a great choice for many new business owners because it offers the protection of a corporation, but with fewer complexities and more flexibility. You get personal liability protection, tax benefits, and operational simplicity, which are key advantages when compared to other business structures.
In this in-depth, step-by-step guide, we’ll break down the entire process of starting an LLC in 2025, showing you how you can do it for $0 in some cases. We’ll also provide insights and advice on how to go about the paperwork and compliance required. Let’s dive in!
What is an LLC?
Before diving into the steps, let’s quickly define what an LLC is. A Limited Liability Company (LLC) is a popular type of business structure in the United States. As the name suggests, it provides liability protection to its owners, which means that members of an LLC are not personally liable for the company’s debts or liabilities. This makes it a great option for those wanting to protect their personal assets while still reaping the benefits of entrepreneurship.
An LLC also allows for a great deal of flexibility. Depending on how it is structured, an LLC can be taxed as a sole proprietorship, partnership, or corporation. This flexibility can save you money on taxes and make it easier to grow your business.
There are many benefits to forming an LLC, including:
- Limited Liability: You’re not personally responsible for the company’s debts and liabilities.
- Tax Flexibility: An LLC can choose how it wants to be taxed, giving it more flexibility in terms of tax strategies.
- Simplicity: An LLC is less formal than a corporation, meaning fewer rules and regulations to follow.
- Credibility: Having an LLC can give your business a more professional image, which can help attract customers and investors.
In this guide, we will walk you through the steps to start an LLC in 2025, keeping things simple and explaining everything in a conversational tone so that you feel confident about the process.
Things You Need to Know Before Forming an LLC
Before jumping into the steps of forming an LLC, it’s important to understand some key details about how LLCs work.
Liability Protection
One of the main reasons entrepreneurs choose to form an LLC is because of the personal liability protection it provides. In an LLC, the members (owners) are typically not responsible for the company’s debts and liabilities. For example, if your business gets sued or owes money, your personal assets (like your house or car) are generally protected.
However, keep in mind that this protection is not absolute. If you personally guarantee a loan, for example, or engage in illegal activities, your personal assets could still be at risk.
Flexibility in Taxation
An LLC offers a great deal of flexibility when it comes to taxes. An LLC is considered a “pass-through entity” for tax purposes, which means that profits and losses “pass through” to the owners’ personal tax returns. This can help avoid the double taxation that corporations face.
However, you can also choose to be taxed as an S-corp or C-corp, depending on what makes the most sense for your business. This flexibility allows LLCs to adapt their tax strategy as they grow.
LLC Structure and Management
One of the best things about LLCs is the flexibility they offer in terms of management. An LLC can be managed by its members (the owners) or by appointed managers. This flexibility allows you to structure your LLC in a way that works best for your business.
If you have multiple members, you can also decide how to divide profits and responsibilities. An LLC can be member-managed, or it can be manager-managed, which means a separate person or group of people handles the daily operations.
STEP 0: Get a Business Idea
Before you even think about forming an LLC, you need a clear business idea. What do you want to offer? Is it a product, a service, or something else? It’s essential to understand your target market and how you can offer something of value to them.
Starting with a solid business idea is the first and most important step. Think about your skills, experience, and passions. What problem are you solving? Who are your competitors, and how can you stand out? The clearer your idea, the easier it will be to move forward with the steps involved in starting an LLC.
STEP 1: Select a State
Choosing the right state to form your LLC in is one of the most important steps. In general, it’s best to form your LLC in the state where you plan to conduct the majority of your business.
Some entrepreneurs choose to form their LLC in a state like Delaware, Nevada, or Wyoming because these states offer business-friendly laws and tax benefits. However, forming an LLC in one of these states when you don’t plan to operate there can lead to additional paperwork, fees, and complexities, including the need to register as a foreign LLC in your home state.
In most cases, it’s easier and more cost-effective to form your LLC in the state where you live or plan to conduct business. If you’re not sure which state is best for your LLC, consider consulting a legal expert or accountant for guidance.
STEP 2: Name Your LLC
The next step in starting an LLC is choosing a name for your business. Your LLC’s name is essential because it’s how customers will identify your business. When selecting a name, keep the following in mind:
- It Must Be Unique: Your LLC’s name must be distinguishable from any existing businesses in the state. Most states have an online database where you can check the availability of a business name.
- It Must Include “LLC”: Most states require the name of your LLC to include “Limited Liability Company,” “LLC,” or “L.L.C.”
- It Should Be Professional: Your business name is often the first impression customers will have of your business, so make sure it’s professional and easy to remember.
- It Must Comply with State Naming Rules: Each state has different rules about what words can and cannot be included in an LLC name.
Reserve Your Business Name
Some states allow you to reserve your LLC name before filing. This can be a good idea if you need more time before officially registering your LLC. A name reservation usually lasts for a limited time (such as 30 or 60 days) and comes with a small fee.
Doing Business As (DBA) or Trade Name
If you plan to operate your business under a name that’s different from your LLC’s legal name, you’ll need to file for a “Doing Business As” (DBA) or trade name. A DBA is simply a name you’ll use publicly for marketing purposes. The process for registering a DBA name varies by state and county, so be sure to check the requirements in your area.
STEP 3: Choose a Registered Agent
Every LLC must designate a Registered Agent who will receive legal documents and official government correspondence on behalf of the LLC. The Registered Agent can be a person or a business entity that offers Registered Agent services.
While you can act as your own Registered Agent, many business owners prefer to hire a professional service to handle this responsibility. This can help you avoid missing important documents and ensure that you’re in compliance with state laws.
Keep in mind that the Registered Agent must have a physical address in the state where your LLC is formed, and they must be available during normal business hours.
STEP 4: File LLC Formation Documents
Once you’ve chosen your business name and Registered Agent, it’s time to file the necessary formation documents with your state. The specific documents you need to file are known as the “Articles of Organization” or “Certificate of Formation.”
These documents include basic information about your LLC, such as:
- Your LLC’s name
- The Registered Agent’s name and address
- The LLC’s address
- The purpose of the LLC (this can often be a general statement such as “engaging in any lawful business activity”)
- The names of the LLC members
Filing Fees
While the process to file your LLC formation documents is relatively simple, there are filing fees associated with it. These fees vary from state to state but typically range from $50 to $500. Some states offer expedited processing for an additional fee, so be sure to check with your state’s Secretary of State office for the exact fees and processing times.
STEP 5: Create an LLC Operating Agreement
Although not always required by the state, it’s highly recommended to create an LLC Operating Agreement. This internal document outlines the ownership structure, management responsibilities, and operating procedures of your LLC.
The Operating Agreement should include:
- The names and ownership percentages of the LLC members
- How the LLC will be managed (either by members or managers)
- How profits and losses will be distributed
- The procedures for adding or removing members
- How the LLC can be dissolved
An Operating Agreement helps prevent misunderstandings and disputes among LLC members and ensures that everyone is on the same page about how the business will be run.
STEP 6: Get an EIN
An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is required for most LLCs. The EIN is used by the IRS to identify your business for tax purposes. It’s also needed to open a business bank account and hire employees.
You can get an EIN for free by applying online through the IRS website. The process is quick, and you’ll receive your EIN immediately.
After Starting an LLC
BOI Report Filing
The Corporate Transparency Act, which took effect in 2021, requires LLCs to file a Beneficial Ownership Information (BOI) report with the Financial Crimes Enforcement Network (FinCEN). This report must list the individuals who own or control the LLC. Filing is required within 30 days of forming your LLC and updates must be made if any changes occur.
LLC Formation Review
Starting an LLC in 2025 is easier than ever, thanks to various online services and state-specific filing systems. You can file most of the necessary documents yourself, which can save you money, but be aware that there may be hidden fees, such as for expedited processing or optional services like Registered Agent services. It’s always a good idea to compare different services and understand what you’re paying for.
Services like LegalZoom, Incfile, and Northwest Registered Agent can help streamline the process, but keep in mind that these services often charge additional fees beyond state filing costs. While these services can be helpful, they aren’t always necessary for a basic LLC formation, especially if you’re comfortable handling the paperwork on your own.
Conclusion
In conclusion, starting an LLC in 2025 is a highly achievable and accessible process, even for those with limited financial resources. The flexibility and protection an LLC offers make it an excellent choice for entrepreneurs looking to structure their businesses in a way that protects personal assets and provides operational simplicity. By following the step-by-step guide outlined above, it’s possible to start an LLC for $0 in some cases, as long as you’re willing to handle the paperwork on your own and avoid unnecessary services.
While there are filing fees associated with forming an LLC, many states have low-cost or even free filing options for basic businesses. The real costs come into play if you opt for additional services like expedited filing or a Registered Agent. It’s important to weigh these optional costs against your business needs. For some entrepreneurs, using online services to handle the legalities of LLC formation can be helpful but may come with hidden fees that could add up.
Additionally, understanding key legal and operational aspects—such as selecting a state, naming your LLC, and creating an operating agreement—will help ensure that your LLC is set up for success from the start. Even if you decide to do the formation process yourself, it’s always good to consult with a lawyer or accountant when needed, especially if your business structure is more complex.
Lastly, once your LLC is formed, remember that there are ongoing compliance tasks like the BOI report filing and any necessary business licenses. Keeping your LLC compliant is critical for maintaining its good standing and avoiding penalties.
Overall, forming an LLC in 2025 is a straightforward and cost-effective way to protect your business and personal assets. By following the steps carefully and making informed decisions about optional services, you can set a strong foundation for your business without breaking the bank.
FAQ’s
How much does it cost to start an LLC?
The cost to form an LLC varies by state, ranging from $50 to $500 in filing fees. Additional costs may include Registered Agent fees, DBA registration, and business licenses.
Can I start an LLC for free?
While you can file the necessary documents yourself to avoid service fees, you’ll still need to pay your state’s filing fees. Some states offer low-cost or even free filing options for certain types of businesses.
Do I need a lawyer to form an LLC?
Not necessarily. Many entrepreneurs successfully form LLCs on their own using online resources and state websites. However, it might be helpful to consult a lawyer if your business has more complex legal needs.
How long does it take to form an LLC?
The processing time for LLC formation depends on the state. It can take anywhere from a few days to several weeks. Some states offer expedited processing for an additional fee.
Do I need a business license?
Depending on your location and the nature of your business, you may need certain licenses or permits. You can check with local authorities to determine what’s required in your area.