How to Start an LLC for $0 (The Cheapest Way to Form an LLC in 2025)

Launching an LLC is straightforward when you follow the right process. You can start by selecting a distinctive business name and appointing a registered agent.

Next, file your Articles of Organization with the state, draft an operating agreement, and obtain an EIN (Employer Identification Number) from the IRS. Additionally, you must pay state filing fees and submit a Beneficial Ownership Information (BOI) report.

Since LLC formation laws vary by state, you must understand your specific requirements. This comprehensive guide will walk you through the entire process and recommend top LLC formation services to ensure a hassle-free registration.

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? Best LLC Formation Services to Start an LLC

• ?? ZenBusiness
• ?? Northwest Registered Agent
• ?? Inc Authority
• ?? StartGlobal
• ?? Doola
• ?? Bizee
• ?? Legal Zoom
• ?? Tailor Brands

? What Is an LLC?

A Limited Liability Company (LLC) is a business structure that combines the liability protection of a corporation with the tax flexibility of a sole proprietorship or partnership.

It shields owners’ assets from business debts and lawsuits while allowing profits to pass through to members without corporate taxation. LLCs offer fewer compliance requirements than corporations, making them ideal for small businesses, startups, and freelancers.

They can have one or multiple owners and choose how they are taxed. Each state has its own rules for forming and maintaining an LLC.

? How to Start an LLC: A Step-by-Step Guide

Starting a Limited Liability Company (LLC) is a crucial step for entrepreneurs seeking personal asset protection, tax flexibility, and business credibility. While the formation process varies by state, understanding each essential step ensures a smooth registration process and compliance with state laws.

?? Choosing the Right Name for Your LLC

Selecting a unique and legally compliant name is the first step in LLC formation. The business name must be distinguishable from existing entities registered in your state.

Additionally, it must include a legal designator such as “LLC,” “L.L.C.,” or “Limited Liability Company” at the end.

Certain words, such as “bank” or “insurance,” may require special approval from state agencies. To avoid legal conflicts, conduct a state business registry search and a trademark check before finalizing the name.

Some states allow business owners to reserve a name for a limited time if they are not ready to proceed with filing.

?? Appointing a Registered Agent for Your LLC

A Registered Agent is required in every state where your LLC operates. This individual or business entity is responsible for receiving legal notices, tax documents, and government correspondence on behalf of the LLC.

The agent must have a physical address in the state of registration and be available during regular business hours.

Business owners can act as their registered agent, designate an LLC member, or hire a professional registered agent service to maintain privacy and ensure compliance with legal requirements.

?? Filing the Articles of Organization

To legally establish your LLC, you must submit the Articles of Organization (also known as a Certificate of Formation) to your state’s business filing office. This document includes key details such as:

• LLC Name
• Business Address
• Registered Agent Information
• Member or Manager Structure

State filing fees range from $50 to $500, depending on the jurisdiction. Some states offer online filing, while others require submission by mail. Once your application is approved, you will receive a Certificate of Formation, officially recognizing your LLC as a legal entity.

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?? Creating an LLC Operating Agreement

An Operating Agreement is an internal legal document outlining how your LLC will be structured and managed.

While not mandatory in all states, it is highly recommended to prevent disputes and establish clear business guidelines.

This agreement typically includes details on ownership percentages, member responsibilities, voting rights, profit distribution, and exit strategies.

Even single-member LLCs benefit from an Operating Agreement as it helps reinforce the LLC’s separate legal identity, strengthening liability protection.

??? Applying for an EIN (Employer Identification Number)

An Employer Identification Number (EIN), also known as a Federal Tax ID, is issued by the IRS and is essential for tax purposes. LLCs with multiple members, employees, or those electing corporate taxation must obtain an EIN.

Even if not required, an EIN is useful for opening a business bank account, establishing credit, and maintaining financial separation between personal and business funds. The EIN application is free and can be completed in minutes through the IRS website.

?? Opening a Business Bank Account

Keeping personal and business finances separate is critical for liability protection, tax compliance, and accurate bookkeeping. Most banks require the following documents to open an LLC bank account:

• EIN (Employer Identification Number)
• Articles of Organization
• Operating Agreement

A dedicated business account also enhances business credibility, simplifies financial management, and helps secure loans or credit lines from financial institutions.

?? Obtaining Business Licenses and Permits

Depending on the industry and location, your LLC may require specific business licenses or permits to operate legally. Common requirements include:

• Federal Licenses (for industries like transportation, broadcasting, or alcohol sales)
• State Licenses (for businesses like construction, legal services, or healthcare)
• Local Permits (such as health permits for food establishments or seller’s permits for retail businesses)

Failure to obtain the necessary permits can lead to fines, legal penalties, or business shutdowns. Check with your state’s business department and local government agencies to ensure compliance.

?? Filing Annual Reports and Maintaining Compliance

Many states require LLCs to file annual reports to keep their business in good standing. These reports typically include updated information about the LLC’s registered agent, business address, and ownership structure.

Some states also impose an annual franchise tax or renewal fees. Missing deadlines can lead to penalties or administrative dissolution of the LLC.

Staying compliant with state regulations, tax filings, and business record-keeping is crucial for maintaining your LLC’s legal status.

? What to Do After Creating an LLC

• ?? Open a Business Bank Account: Keep personal and business finances separate to maintain liability protection and simplify accounting.
• ?? Set Up Accounting and Bookkeeping: Track business expenses, file taxes correctly, and maintain financial records for legal and operational efficiency.
• ?? Obtain Business Insurance: Protect your LLC from potential risks with liability, property, or workers’ compensation insurance.
• ?? Register as a Foreign LLC If Expanding: If operating in multiple states, register your LLC in each new state to remain legally compliant.
• ?? Develop a Business Growth Strategy: Focus on marketing, funding, and networking to scale your business effectively.

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? Types of LLCs

• ?? Single-Member LLC: Owned by one individual or entity, this LLC provides liability protection while being taxed like a sole proprietorship.
• ?? Multi-Member LLC: Formed by two or more owners, it operates like a partnership but with limited liability protection for members.
• ?? Series LLC: A unique structure where multiple LLCs operate under a parent LLC, keeping assets and liabilities separate for each series.
• ?? L3C (Low-Profit LLC): Designed for businesses with a social mission, it blends nonprofit and for-profit benefits while attracting impact investors.
• ?? Professional LLC (PLLC): Reserved for licensed professionals like doctors, lawyers, and accountants, offering liability protection for malpractice claims.
• ?? Foreign LLC: When an LLC operates in a state other than its formation state, it must register as a foreign LLC to comply with local regulations.
• ?? Anonymous LLC: Available in select states, this LLC type allows owners to keep their names private from public business records.
• ?? Restricted LLC: Used mainly for estate planning, it restricts profit distributions for a set period to protect generational wealth.

? Why Form an LLC?

• ?? Limited Liability Protection: Owners are not personally responsible for business debts and lawsuits, protecting personal assets.
• ?? Pass-Through Taxation: Profits and losses pass directly to owners, avoiding double taxation imposed on corporations.
• ?? Flexible Management Structure: LLCs allow owners to manage the business themselves or appoint managers without strict corporate formalities.
• ?? Fewer Compliance Requirements: Compared to corporations, LLCs have less paperwork, fewer reporting obligations, and no mandatory board meetings.
• ?? Credibility and Professionalism: Operating as an LLC enhances business credibility, making it easier to attract investors, clients, and lenders.
• ?? Customizable Profit Distribution: Unlike corporations, LLCs allow members to distribute profits based on agreements rather than ownership percentage.
• ?? Easier Business Expansion: LLCs can be converted into corporations, registered in multiple states, and structured to accommodate future growth.

? How Much Does It Cost to Establish an LLC?

The cost of forming an LLC (Limited Liability Company) varies by state and includes several mandatory and optional expenses. Understanding these costs helps business owners budget effectively and avoid unexpected fees.

• ?? State Filing Fees: The primary cost of establishing an LLC is the state filing fee for submitting the Articles of Organization. This fee ranges from $50 to $500, depending on the state. For example, forming an LLC in Kentucky costs $40, while in California, it costs $70 plus an annual franchise tax.
• ?? Registered Agent Fees: If you hire a professional registered agent to receive legal documents on behalf of your LLC, expect to pay between $100 to $300 per year. Acting as your registered agent eliminates this cost but may compromise privacy.
• ?? Annual Report and Franchise Taxes: Many states require LLCs to file annual reports and pay franchise taxes or renewal fees, typically ranging from $50 to $800 per year. States like Delaware and California have higher annual costs due to franchise taxes.
• ?? Business Licenses and Permits: Depending on your industry and location, you may need state or local business licenses. Costs vary widely, from $50 to several hundred dollars for industry-specific permits.
• ?? Operating Agreement (Optional but Recommended): While not legally required in most states, drafting an Operating Agreement helps define ownership and management rules. Legal assistance for this document may cost $100 to $500.
• ?? EIN (Employer Identification Number): Obtaining an EIN from the IRS is free and required if your LLC has multiple members or employees.
• ?? Legal and Formation Services (Optional): Hiring a lawyer or an online formation service like LegalZoom or ZenBusiness can cost between $50 to $500, depending on the level of assistance needed.

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Total Estimated Cost to Establish an LLC

• ?? Minimum Cost: Around $50 to $100 (if self-filed in a low-cost state).
• ?? Average Cost: Between $200 to $500 (including a registered agent and business licenses).
• High-End Cost: Up to $1,000 or more (if hiring professional services and requiring multiple permits).

? How To Start An LLC: Pros & Cons

Pros:

• ?? Limited Liability Protection: An LLC separates personal and business finances, protecting owners from personal liability for business debts and lawsuits.
• ?? Pass-Through Taxation: LLCs avoid double taxation by passing profits and losses directly to members, who report them on their tax returns.
• ?? Flexible Management Structure: Unlike corporations, LLCs do not require a board of directors or strict formalities, allowing members to manage the business directly or appoint managers.
• ?? Less Compliance and Paperwork: LLCs have fewer reporting requirements compared to corporations, making them easier to maintain and operate.
• ?? Increased Credibility: Registering as an LLC makes your business appear more professional and trustworthy, helping attract customers, investors, and partners.
• ?? Customizable Profit Distribution: Unlike corporations, which distribute profits based on shareholding, LLCs allow members to divide profits according to their operating agreement.

Cons:

• ? Self-Employment Taxes: By default, LLC owners must pay self-employment taxes on their entire share of business income, which can be higher than corporate tax structures.
• ? Annual Fees and Compliance Costs: Many states require LLCs to file annual reports and pay franchise taxes or renewal fees, which can range from $50 to $800 per year.

? Conclusion: Final Thoughts On This Topic

Starting an LLC is a smart move for business owners seeking liability protection, tax benefits, and credibility.

It separates personal and business assets, reducing financial risk. While there are state fees and compliance requirements, the advantages far outweigh the costs.

Proper record-keeping and legal compliance ensure long-term business success. An LLC provides flexibility, security, and a solid foundation for growth.

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? How To Start An LLC: FAQs

• Q. What are state filing fees for forming an LLC?
• Ans: State filing fees for LLC formation vary by state but typically range from approximately $50 to $500 or more. These fees are required to submit necessary documents like Articles of Organization to officially establish your LLC.
• Q. Do I need an Employer Identification Number (EIN) for my LLC?
• Ans: Yes, most LLCs need an EIN, which is obtained from the IRS. It’s free to apply for an EIN, and it’s used for federal tax purposes, hiring employees, opening a business bank account, and more.
• Q. How are LLCs taxed?
• Ans: LLCs are generally pass-through entities for tax purposes, meaning profits and losses pass through to the owners’ tax returns. However, LLCs can choose to be taxed as a corporation if beneficial, subjecting them to different tax obligations.
• Q. How are LLCs taxed?
• Ans: LLCs are generally pass-through entities for tax purposes, meaning profits and losses pass through to the owners’ tax returns. However, LLCs can choose to be taxed as a corporation if beneficial, subjecting them to different tax obligations.
• Q. Are there self-employment taxes for LLC owners?
• Ans: Yes, LLC owners who are active in the business may be subject to self-employment taxes on their share of the LLC’s income. This tax covers Social Security and Medicare taxes.

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