Start your business, the right way.

An LLC — Limited Liability Company — is a legal wrapper around your business that separates your personal assets from anything the business does. Your house, your car, your savings, your retirement account: all shielded. If someone sues your business, they sue the LLC. Not you. That's the entire point, and it's why forming one is the single most valuable move a new founder can make.

You need an LLC if you're doing any of the following: taking money from customers, signing contracts, hiring employees or contractors, buying inventory, driving for a delivery or rideshare business, renting out property, selling physical products, or running a service business that could get sued for a mistake. If any of those apply, form the LLC before you take your first dollar. Retroactively forming one after a lawsuit doesn't protect you from the lawsuit.

You probably don't need one if you're testing an idea on the side, haven't made your first dollar, and aren't taking on any real liability. A hobbyist selling stickers on Etsy for pocket money can wait. A freelance developer signing a $10,000 contract with a client cannot. When in doubt: form it. It costs $50–$300 once and $0–$800 per year to maintain, which is nothing compared to the cost of losing your house because someone slipped on your dropshipping company's product.

The alternatives — sole proprietorship, general partnership — are what you default to if you don't file anything. They're free, but they offer zero liability protection. Every debt, contract, and lawsuit is personally yours. An LLC is almost always worth the filing fee.

Form the LLC in the state where you actually operate. Not Delaware. Not Wyoming. Not whatever a YouTuber said about "asset protection." If you live and work in Texas, form a Texas LLC. If you're in Florida, form a Florida LLC. This isn't a preference — it's how state business law actually works.

Here's why: if you form your LLC in Wyoming but run the business from California, California legally considers you to be "doing business" in California. You have to register your Wyoming LLC as a foreign LLC in California, pay California's filing fee, pay California's $800/year franchise tax, and file two annual reports every year — one in Wyoming and one in California. You pay twice for zero extra protection. Every state works this way.

The only real exceptions are two specific situations. First: real estate holding companies. If you own rental property in multiple states, forming a parent LLC in Wyoming or Delaware for privacy and asset-protection reasons can make sense, with individual state LLCs holding each property. Second: venture-funded startups. Delaware is the default for anyone planning to raise institutional money because that's what investors expect and Delaware corporate law is the most predictable in the country.

Everyone else — freelancers, agencies, ecommerce, trucking, cleaning, construction, consulting, content creators, service businesses — should form in their home state. Full stop.

Your LLC name has two hard requirements: it has to be unique in your state, and it has to include "LLC," "L.L.C.," or "Limited Liability Company" at the end. Before you fall in love with a name, search your Secretary of State's business database and confirm no one else has it. While you're at it, check that the matching .com domain and social handles are available — brand consistency matters more than most people think for a business that's supposed to look legitimate.

Once you have a name, the actual filing is one document: the Articles of Organization (sometimes called a Certificate of Formation or Certificate of Organization, depending on the state). It's a short form you file online through your state's business portal. It asks for your LLC name, your registered agent's address, the business purpose (a generic "any lawful business" is fine in most states), and the names of the members.

Filing fees vary a lot by state. On the cheap end: Kentucky ($40), Arizona ($50), Colorado ($50), New Mexico ($50). On the expensive end: Massachusetts ($500), Tennessee ($300), Illinois ($150 plus an annual $75 report). Most states land between $100 and $200. Processing time ranges from same-day (Colorado, Florida, Delaware for online filings) to 4–6 weeks (states that still process by mail).

If you'd rather not touch government websites at all, Tailor Brands files it for you, sets up your registered agent, gets your EIN, and drafts your operating agreement in a single flow. Most people finish the checkout in 15 minutes. It's what we recommend to anyone who values their time more than a couple hundred dollars.

An EIN — Employer Identification Number — is the federal tax ID for your business. It's the business equivalent of a Social Security number. The IRS uses it to track your business tax filings, and every bank in the country will ask for it before they open you an account. You cannot operate a real business without one.

Here's the important part: the EIN is free. Ten minutes on irs.gov/ein, a short form about your business, and you get a PDF letter (called a CP 575) with your number on it. Never pay a third-party service just to get an EIN. Some companies charge $100–$300 for something that costs nothing and takes less time than making coffee. The only reason to bundle EIN filing with a paid service is if you're doing everything in one checkout — like with Tailor Brands — and want a single company handling the whole stack.

You need to have your LLC approved before you apply for the EIN, because the IRS form asks for the exact legal name of the entity and its formation date. Save the CP 575 letter somewhere permanent. Banks, lenders, payroll companies, and the IRS itself will ask for it for as long as your business exists.

Every state requires your LLC to have a registered agent — a person or company at a physical street address in your formation state who can receive legal mail and government notices on the LLC's behalf. They have to be available during business hours. P.O. boxes don't count.

You have two options. You can serve as your own registered agent for free — but your home address becomes part of the public business record, findable by anyone with an internet connection. Or you can hire a registered agent service for $50–$150 per year and use their address instead. If you work from home, care about privacy, or run any kind of consumer-facing business where an angry customer could look you up, pay the $100. It's the cheapest privacy insurance you'll ever buy.

The operating agreement is the internal rulebook for the LLC. It spells out who owns what percentage of the business, how profits and losses are split, how new members join, what happens if a member wants to leave or dies, how the business is dissolved, and who has authority to sign contracts. Only a handful of states legally require one — California, New York, Missouri, Delaware, and Maine — but every bank will ask for it when you open an account, and every court will look at it if there's ever a dispute.

Even single-member LLCs need one. A missing operating agreement is one of the most common ways courts pierce the corporate veil and expose owners to personal liability. If it's just you, a simple 5-page template that says "I own 100%, I make all decisions, and here's how I'll be paid" is enough. But you need one on file.

This is the step most new owners skip — and it's the single fastest way to destroy the liability protection you just spent $200 to set up. If you deposit business revenue into your personal checking account, or pay for business expenses on your personal credit card, a court can decide the LLC is a sham and hold you personally liable for everything the business does. It's called piercing the corporate veil, and mixing personal and business money is how it happens.

The rule is simple: the LLC has to have its own bank account, its own money, and its own paper trail. Non-negotiable. Every dollar the business earns goes into the LLC's account. Every business expense comes out of it. When you want to pay yourself, you transfer money from the business account to your personal account and document it as an owner's draw.

To open a business bank account you need three documents: your filed Articles of Organization (proof the LLC exists), your EIN letter from the IRS, and your operating agreement. Most online business banks — Bluevine, Relay, Mercury, Novo — will open you an account the same day with no minimum balance and no monthly fees. Traditional banks like Chase and Bank of America want you to walk in with a printed folder, but their business checking is usually solid if you already bank with them personally.

For a full breakdown of which account fits which kind of business, see our business bank accounts page. We rank them by real-world fees, transfer speed, and integrations with tools like Stripe, QuickBooks, and payroll providers.

A business credit card does three things a personal card cannot. First, it builds business credit under your EIN — a separate credit profile from your personal credit that lenders will eventually use to approve larger financing without touching your personal score. Second, it keeps every business expense automatically separated from personal spending, which turns tax season from a nightmare into a 30-minute export. Third, business cards almost always come with bigger sign-up bonuses and better category multipliers than the personal versions of the same cards.

The good news: you can qualify for most business credit cards with just your LLC, your EIN, and your personal credit score. No revenue history required in year one. Card issuers approve you based on your personal creditworthiness for the first year or two, then start weighting business revenue as it grows.

The workhorses for new businesses: the Chase Ink Business Unlimited (1.5% cash back on everything, $900 sign-up bonus, 0% APR intro period), the Chase Ink Business Cash (5% on office supplies and internet/phone/cable), and the Amex Business Gold if you spend heavily in specific categories like advertising or shipping. For simple no-fee starter cards, the Capital One Spark Cash Select is hard to beat.

Full comparison with real numbers on our business credit cards page. Apply for one, not four — multiple applications in the same month can tank your personal credit and get you flagged by Chase's approval algorithm.

The single biggest mistake first-time founders make is taking on debt before they have revenue. A business loan doesn't create demand. It doesn't fix a bad idea. It just adds a monthly payment on top of a business that hasn't proven anyone will pay for what it sells. Wait until you have real revenue before you borrow.

Once you're generating a few thousand a month consistently, the toolbox opens up. An SBA 7(a) loan can get you up to $5 million at competitive rates if you can wait 60–90 days for underwriting. A business line of credit from your bank or a lender like Bluevine or Fundbox lets you borrow only what you need, when you need it. A 0% APR intro-period business credit card can float a big purchase for 12–15 months interest-free.

Realistically, most new businesses are funded by three things and three things only: the founder's savings, revenue from the first paying customers, and one 0% APR business card carrying inventory or equipment costs through the ramp. That's it. Skip the term loans, skip the merchant cash advances (predatory), and skip anyone selling you "guaranteed business funding" in a DM.

Filing the LLC isn't the end — it's the start of an ongoing relationship with your state and the IRS. Most states require an annual report, a one-page filing that confirms your business is still active and your registered agent info is current. Fees vary wildly: Missouri and New Mexico charge $0, most states charge $20–$100, and California charges $800/year in franchise tax whether the business makes any money or not. Miss the deadline and your LLC gets administratively dissolved, which is a legal mess to undo and can expose you to personal liability during the gap.

On the tax side, an LLC is a flexible wrapper. By default, a single-member LLC is taxed as a sole proprietorship (income flows through to your personal 1040) and a multi-member LLC is taxed as a partnership (income flows through to each member's personal return). This is called pass-through taxation and it's what makes LLCs simpler than corporations for most small businesses.

Once your business is netting more than about $40,000 per year in profit, you can elect to be taxed as an S-Corp by filing IRS Form 2553. This lets you split your income between a "reasonable salary" (subject to self-employment tax) and distributions (not subject to self-employment tax), which can save $3,000–$10,000 per year in taxes for the right business. It also adds real paperwork — payroll, quarterly filings, a separate 1120-S return — so talk to a CPA before you do it. Under $40k in profit, it's usually not worth the complexity.