How to start an LLC: a step-by-step guide for online sellers

How to start an LLC, step by step

The IRS describes an LLC as a business structure allowed by state statute, with rules that differ from state to state. The steps below are the ones most states share. Form names, offices and fees differ, so read your own state's instructions next to this list.

1. Check that the name is available

   Check the name with your state's business filing office before you file, because most states do not let you register a name someone else has already registered. Name rules differ by state, and some states require your entity name to reflect the kind of business it represents. In Texas, for example, the name must contain "limited liability company", "limited company" or an abbreviation of one of these. The SBA notes that an entity name, a trademark, a DBA and a domain name are legally independent of each other, so check the trademark and the domain too if the name matters to your brand.

2. Choose a registered agent

   The SBA says an LLC needs a registered agent in its state before it files. The agent receives official papers and legal documents on behalf of the company and must be located in the state where you register. You can take the role yourself or pay a service. The SBA notes that many owners use a registered agent service rather than take on the role themselves.

3. File articles of organization

   You file with the Secretary of State's office, a business bureau or a business agency, depending on the state. The SBA describes articles of organization as a simple document with the company name, address, member names and registered agent. Some states use another name for the same filing: Texas calls it a certificate of formation (Form 205). The state charges a filing fee, and the SBA puts the total cost to register at less than $300 in most cases, with fees that vary by state and business structure.

4. Write an operating agreement

   The SBA explains that an operating agreement sets out how key decisions are made and each member's duties, powers and responsibilities, and that creating one is widely recommended. It matters even for a one-person shop that may add a partner later: if a member joins or leaves, some states may require the LLC to be dissolved and re-formed with new membership, unless an agreement is already in place. Keep the signed agreement with your records.

5. Get an EIN from the IRS

   The SBA says to apply right after you register your business. An EIN is free on the IRS website, and it is issued immediately online if the application is approved. The IRS notes that most new single-member LLCs classified as disregarded entities will need to obtain an EIN. With no tax election, a one-person LLC does not need an EIN if it has no employees and no excise tax liability, but it can apply for an EIN if it needs one to open a bank account or state tax law requires one.

6. Open a business bank account

   The SBA says as soon as you start accepting or spending money as your business, you should open a business bank account. Banks commonly ask for an EIN, your formation documents, ownership agreements and a business license. Keep shop sales and shop costs in this account, and keep your personal money out of it.

7. Register for state taxes and permits

   Registering the LLC is one filing among several. The SBA notes that most businesses will also need a tax ID number and the appropriate licenses and permits, and that tax obligations differ at the state and local levels, so check your state's websites. A seller's permit, a sales tax account and a local business license are separate registrations where your state or city requires them, so check each one before your first sale in the LLC's name.

8. Keep the LLC in good standing

   Each state sets its own recurring reports and taxes for LLCs. Put the dates in your calendar the day the state approves the LLC, because a missed date can cost money. In Florida, for example, the annual report costs $138.75 a year, or $538.75 if received after May 1.

What it costs to form an LLC in four states

Each state sets its own filing fee and its own yearly costs. The yearly cost can matter more than the filing fee, because it repeats for as long as the LLC exists.

The table shows four states as examples, not as a ranking. The amounts come from each state's own filing office or tax agency.

California's annual tax is due even if the LLC does no business, until you cancel it. The first payment is due by the 15th day of the 4th month after you file with the Secretary of State, so a California LLC formed to test a few products still owes it.

In Texas, franchise tax covers limited liability companies, including single-member LLCs, so a small Texas LLC still files a report each year even when it owes no tax.

If you form in one state and run the shop from another, you might need to file for foreign qualification in other states where your business is active, and an LLC registered as foreign in another state typically pays taxes and annual report fees in both states. That is why forming in a state you do not live in usually adds cost for a small shop.

How the IRS taxes an LLC

The IRS has no single tax treatment for an LLC. For federal income tax, it treats an LLC as a corporation, a partnership, or part of the owner's tax return (a disregarded entity), depending on its members and elections. A one-person online shop is usually the first row of the table below.

With no election, the individual owner of a one-person LLC pays self-employment tax in the same manner as a sole proprietorship. The IRS rate is 15.3%, and you owe it when net earnings from self-employment are $400 or more.

A corporation or S corporation election changes how you file and what you pay, so make that decision with a tax professional who knows your numbers and your state.

LLC for an online business: do you need one?

You can sell online without an LLC. If you sell without registering any structure, you are automatically a sole proprietorship. In that structure, you can be held personally liable for the debts and obligations of the business. An LLC changes that, because it protects your personal assets, such as your vehicle, house and savings, in most instances.

That protection is real but limited. The SBA notes that LLC status can protect personal property from lawsuits, but that protection has limits, and that business insurance can fill in gaps in coverage. It describes LLCs as a good fit for medium- or higher-risk businesses and owners with significant personal assets they want protected, and sole proprietorships as a good fit for low-risk businesses and owners who want to test their business idea before forming a more formal business.

• An LLC tends to make sense when your products could injure someone or damage property, for example candles, skincare or food.
• It also makes sense when you have savings, a home or other assets you want to keep apart from the shop.
• It helps when you sell with a partner and want written rules on who owns what.
• It can wait while you are testing a few products and your state's yearly LLC cost would take most of the profit.

Once the LLC exists, update the legal name and tax number on your selling and payment accounts, and check whether your state needs a new seller's permit or sales tax account in the LLC's name.

Beneficial ownership reports: what changed

Older guides say every new LLC must file a beneficial ownership information (BOI) report with the Financial Crimes Enforcement Network (FinCEN). That is out of date. In an alert dated August 11, 2026, FinCEN says it has finalized its BOI reporting rule, and under the new rule U.S. companies are exempt from BOI reporting and no longer have to file BOI reports.

The exemption covers U.S. companies. If your company was formed under the law of another country, read FinCEN's page before you file anything. FinCEN's page also warns about fraudulent attempts to solicit information from individuals and entities, and says there is no fee to file BOI directly with FinCEN.

Where Nation fits

Questions about starting an LLC