You've run the numbers from lesson 2 and decided an LLC is worth it. Good news: forming one is genuinely easy — most people can do it themselves in an afternoon for the cost of the state fee. The websites charging $300 "formation packages" are mostly filling out a one-page form on your behalf. Here's the whole checklist, in order.
Step 1: File articles of organization (the birth certificate)
The articles of organization is the document that legally creates your LLC. You file it with your state's business agency (usually the Secretary of State), almost always online, and it typically asks for just:
- The LLC's name (must be unique in your state and end with "LLC" or similar — the state's website has a free name-search tool)
- A business address
- Your registered agent (next step)
- Who's managing it (for a one-person LLC: you)
The fee ranges from about $35 to $500 depending on the state. Approval takes anywhere from minutes to a few weeks.
Step 2: Name a registered agent
Every LLC must list a registered agent — a person or company at a physical address in the state, available during business hours, to receive legal documents (like notice of a lawsuit) on the LLC's behalf.
You can be your own for free if you have an in-state address you don't mind being public record. Paid services (~$100–$150/year) make sense if you work from home and want your address private, or you move often. The one rule: keep it current — if a lawsuit notice can't reach you, the case can proceed without you.
Step 3: Get an EIN — free, from the IRS, in 10 minutes
An EIN (Employer Identification Number) is a Social Security number for your business. You'll need it to open a business bank account, and you can give it to clients on tax forms instead of your personal SSN — a nice identity-protection bonus.
Get it at IRS.gov, where it is completely free and issued instantly online. This bears repeating because an entire industry of lookalike websites charges $50–$300 for the same thing. If a site asks for payment to "process your EIN," you're on the wrong site.
Step 4: Write an operating agreement
An operating agreement is the LLC's internal rulebook: who owns what percentage, how profits are split, what happens if an owner leaves. Most states don't legally require one — write one anyway:
- Single-owner LLC: a simple one reinforces that the LLC is a real, separate entity — useful evidence if anyone ever challenges your liability shield. Free templates are fine here.
- Multi-owner LLC: non-negotiable. Every horror story about friends starting a business together is really a story about not writing down the deal while everyone was still friends. Worth actual legal help.
Step 5: Open a business bank account (the step people skip)
This is the most important ongoing habit on the list. Take your articles and EIN to a bank and open a checking account in the LLC's name. From that day forward:
- Every client payment lands in the business account.
- Every business expense is paid from it.
- You pay yourself by transferring money to your personal account (an "owner's draw") — and then personal spending happens only from the personal side.
Why so strict? Because commingling funds — mixing business and personal money — is the #1 way courts justify piercing the corporate veil and erasing the protection you formed the LLC for. One account swipe won't doom you; a habit of treating the business account as a personal wallet might.
Step 6: Set up boring, beautiful bookkeeping
Nothing fancy required at the start:
- Track every transaction — bookkeeping software (~$15–$30/month), or honestly a well-kept spreadsheet at first.
- Save receipts for anything you'll deduct — a photo in a cloud folder counts.
- Move 25–30% of every payment into a tax sub-account the day it arrives, for quarterly estimated taxes — the full system is in lesson 3.
- Calendar your state's annual report deadline right now. Most states require a short annual (or biennial) filing plus a fee; miss it repeatedly and the state can administratively dissolve your LLC — quietly ending your liability protection while you keep working, unprotected, without knowing it.