How to Start an LLC in 2026: The Complete Legal Guide

An LLC is the default business structure for most American small businesses because it combines liability protection with tax flexibility and minimal ongoing formalities. Actually forming one is straightforward. Setting it up in a way that will still be working correctly three years from now takes a little more thought.

Step 1. Choose the right state

Form your LLC in the state where you actually do business. Delaware and Wyoming get a lot of attention, and they are excellent choices for companies that will raise venture capital or have investors, but for a normal operating business they usually just create an additional foreign qualification filing.

Formation fees by state in 2026

• Kentucky: 40 dollars, the lowest in the country.
• New Mexico: 50 dollars and no annual report requirement.
• Delaware: 110 dollars filing plus 300 dollars annual franchise tax.
• Wyoming: 100 dollars filing plus 60 dollars annual report.
• California: 70 dollars filing plus an 800 dollar minimum annual franchise tax.
• New York: 200 dollars filing plus a costly publication requirement in most counties.
• Massachusetts: 500 dollars filing, the highest in the country, plus 500 dollars annually.

Step 2. File the Articles of Organization

The Articles of Organization is a short public document that officially creates your LLC. It generally requires the company name, the address, and the name and address of a registered agent. Every state offers online filing. Approval usually takes 1 to 10 business days.

Step 3. Get an EIN from the IRS

An Employer Identification Number is required to open a business bank account, hire employees, and file taxes. The IRS issues them for free online in minutes. Beware paid services that charge 75 to 300 dollars for this. It is a scam.

Step 4. Write an operating agreement

This is the single most important document your LLC will ever have. It defines ownership percentages, who has authority to make decisions, how profits and losses are allocated, what happens when a member wants out, what happens when a member dies, and how disputes are resolved. States allow single member LLCs to operate without one, but doing so exposes you to the very argument you formed the LLC to avoid.

Step 5. Understand your tax classification

• A single member LLC is taxed as a sole proprietorship by default, reported on Schedule C.
• A multi member LLC is taxed as a partnership by default, filing Form 1065 and issuing K-1s.
• Any LLC can elect to be taxed as an S corporation once its profits justify it, typically above 60,000 dollars per year.
• In rare cases, an LLC may elect to be taxed as a C corporation, most often when raising outside investment.

Ongoing requirements founders forget

1. Annual report or biennial statement in your formation state.
2. Annual franchise or minimum tax where applicable.
3. Business license renewals in your city and county.
4. Sales tax registration and filings if you sell taxable goods or services.
5. Beneficial Ownership Information reporting with FinCEN when required.
6. Payroll tax filings if you have employees.