LLC Formation: DIY vs. a Service (and What's Actually Free)

"Best LLC formation service" lists rank companies competing to file a form you can often file yourself. Here's the honest version: forming an LLC means filing one document with your state and paying the state fee — that fee is unavoidable no matter who files it — and much of what services charge for (an EIN, an operating agreement, being your registered agent) is either free or something you can do yourself. So the real decision isn't "which service," it's "do I DIY for the state fee, or pay for convenience?" — and if you pay, knowing which upsells to refuse. This guide covers both.

The article's disclaimer applies throughout; the full version is on our disclaimer page.

Who this is for

This is written for a US-based owner of a small or new business forming their first LLC — a freelancer, a side-business operator, a two-person partnership, an online seller. It assumes no legal background and no prior filing experience.

It will serve you well if you are in one of these situations:

• You have a simple, single-member business in one state. This guide covers your entire path. You will very likely DIY.
• You have one or two co-owners and a straightforward split. Everything here applies, plus a real operating agreement matters more than it does for a solo owner.
• You are deciding whether to form one at all. Start at the next section; it is the question most articles skip.

It is not enough on its own if any of these are true — see when to get professional help for what to do instead:

• You have outside investors, a complex equity split, or plan to raise capital.
• You operate in a licensed profession (medicine, law, accounting, architecture) where your state may require a PLLC or restrict LLC ownership.
• You will operate in several states, which triggers foreign-qualification filings in each.
• You already have significant assets or contracts to move into the entity.

Do you actually need one?

An LLC is not free and not maintenance-free, so the honest first question is whether you need one yet. Three conditions make it worth the fee and the annual paperwork:

1. There is real liability to protect against. Could the business plausibly be sued, injure someone, or take on debt it can't pay? A dog-walking business, a contractor, a food seller and a landlord all have real exposure. A hobby blog earning $40 a month usually does not.
2. There are personal assets worth protecting. The protection is only worth what it shields. If you have savings, a home, or a vehicle with equity, it protects something. If your net worth is currently negative, the calculation is different.
3. A counterparty requires it. Some clients, marketplaces, wholesalers and landlords will only contract with a registered entity. This one is binary — if you have been told you need one, you need one.

If none of the three is true yet, operating as a sole proprietorship is a legitimate choice, not a shortcut: it is what you already are by default, it costs nothing, and you can convert later (see Alternatives). Many small side businesses run this way until there are real assets or real liability to protect.

Bottom line: form the LLC when there is something to protect and something to protect it from. Forming one "because that's what businesses do" buys you an annual report and a fee.

What an LLC actually does

An LLC (Limited Liability Company) does one main job worth paying attention to: it separates your personal assets from your business's liabilities, so if the business is sued or owes debts, your personal savings and home are generally protected. It also offers flexible, pass-through taxation. That protection is the reason to form one — but it comes from properly forming and maintaining the LLC, not from which website you used to file.

Three limits on that protection are worth knowing before you pay for it, because they are where readers are most often surprised:

• It does not protect you from your own actions. If you personally cause harm — you drive badly on a delivery, you give negligent advice — you can be sued personally regardless of the entity.
• It does not survive a personal guarantee. Most banks and many landlords will require you to personally guarantee a business loan or lease. Where you have signed one, the LLC does not stand between you and that debt.
• It does not survive commingling. If business and personal money run through the same account, a court can treat the entity as a formality and disregard it. This is the single most common way owners lose the protection they paid for, and it is entirely avoidable.

The point: the value is the liability protection, and you get the same protection whether you file it yourself or pay someone to file it for you.

Why it matters more than which service you use

Every dollar of the "which service is best" question is a rounding error next to three things that actually determine whether your LLC works:

Only the third is affected by who files. It is also the easiest of the three, which is the honest reason most people can DIY.

What you need before you start

Formation is not a research project, but it does have prerequisites. Gather these first and the filing itself takes under an hour.

How to find your state's actual fee (and the two numbers next to it)

This is a research instruction, so here is the research process rather than the instruction alone.

1. Go to your state's business filing office. In most states this is the Secretary of State; in a few it is the Department of State, Division of Corporations, or Corporation Commission. The SBA's launch guidance is the neutral directory route to yours.
2. Look for "Articles of Organization" or "Certificate of Formation" — the same document under different state names — and its fee schedule.
3. While you are there, write down two more numbers, because they cost more over time than the filing fee does:

• the annual (or biennial) report fee and its due date, and
• whether your state charges a franchise tax or annual entity tax, and its minimum.

1. Judge what you find. Use only the .gov page. Formation-service websites publish state-fee tables that are frequently out of date and are structured to make their own pricing look better by comparison. If a fee figure differs between a service's table and the state's own page, the state is right.

Bottom line: the filing fee is a one-time number and usually the smallest of the three. In a handful of states the annual obligation dwarfs it — which is exactly why "which state has the cheapest filing fee" is the wrong question.

The real cost: one fee you can't avoid, and a lot you can

• State filing fee (unavoidable): roughly $35–$500 depending on your state (most are $50–$175). This goes to the state, not a service — everyone pays it. Fees and annual obligations vary a lot, so check your own state rather than any article's table; the SBA's launch guidance is the starting point, and the IRS's LLC page covers how the entity is treated federally.
• Registered agent (free or paid): every LLC needs one, but you can usually be your own registered agent for free if you have a state address and are available during business hours. A service charges $50–$300/year — worth it mainly if you want your address off public record or won't be reliably reachable.
• EIN (free): your federal tax ID is free directly from the IRS — it takes minutes online. Never pay a service for an EIN.
• Operating agreement (free/DIY): a template is fine for a simple single-member LLC; you don't need to buy one for most cases.

Once formed, the entity also changes how you file — tax software handles a single-member LLC straightforwardly, but a multi-member one is a different return.

Bottom line: the only cost you can't avoid is the state fee. A service's price on top of that is buying convenience — and several of its "features" are things that are actually free.

The flagship: DIY or pay a service — and dodge the "free LLC" trap

DIY if your situation is simple (single-member, one state, standard business): file the Articles of Organization on your Secretary of State's website, pay the state fee, be your own registered agent, and get your EIN free from the IRS. Total cost = the state fee. The trade-off is that you own every step — filing accurately and tracking your state's annual-report deadlines (a missed deadline can cost your LLC its good standing).

Pay a service if you value the hand-holding, want the paperwork handled correctly the first time, or want a registered-agent service to keep your address private — those are legitimate reasons.

But dodge the "free LLC" trap: "$0 formation" is a loss-leader, not free — you still pay the state fee, and the service recoups its costs through upsells: charging for an EIN you can get free, an operating agreement, "expedited" filing, and especially registered-agent renewals that are cheap or free the first year and jump afterward. People routinely end up paying hundreds in add-ons on a "$0" offer.

The trade-offs in one place

The services themselves, named and unranked

The previous version of this article declined to name any service. That was the right call about pricing and the wrong outcome for the reader: it left an argument the reader could accept and not act on. So — the main national providers, alphabetically, not ranked, not tested, and with no price asserted by us. Each link goes to that company's own pricing page, which is where the current number lives:

• Bizee (formerly Incfile)
• LegalZoom
• Northwest Registered Agent
• Rocket Lawyer
• ZenBusiness

How to compare them in five minutes, since we are not doing it for you:

1. Open each pricing page and find the total for year one, including the state fee, not the headline number.
2. Find the year-two registered-agent renewal price. It is usually further down the page or in a FAQ, and it is where the real cost lives.
3. Check whether an EIN is included or charged. If charged, subtract it mentally — you can get it free.
4. Check whether the base tier includes an operating agreement, and whether the "compliance" or "worry-free" subscription auto-renews.
5. Ignore the star ratings on comparison sites; most are affiliate-monetized. Compare the two numbers from steps 1 and 2 and buy on those.

Bottom line: DIY costs just the state fee and is very doable for a simple LLC. If you'd rather pay for convenience, fine — but decline the EIN charge (it's free), watch the registered-agent renewal price, and skip upsells you don't need. "$0" is the hook, not the price.

A worked example: three owners, three different answers

Illustrative arithmetic using the Tier-B ranges above — not quotes, and not your state's numbers. What varies across these three is only what actually drives the cost: number of members, number of states, and whether you want your address off the public record.

Maya — where the money goes to privacy, not filing. Take the case of a designer working from a flat, invoicing six clients. She files the Articles herself in about forty minutes, and the only thing she pays for beyond the state fee is a registered agent — not because the filing is hard, but because the registered agent's address becomes public record and hers would otherwise be her home. That is a privacy purchase, and it is the correct one for her. Everything a formation service would have sold her on top of that — the EIN, the operating agreement, expedited processing — she does herself in an evening for nothing.

Dev and Priya — where the filing is the easy part. Suppose you and a colleague leave the same employer and take two clients with you. The formation itself is the cheapest of the three cases here: one of you has an office, so one of you is the registered agent, and the total outlay is the state fee. What actually matters for them is the document nobody files anywhere — the operating agreement setting out the split, what happens to the clients if one leaves, and who decides what. A template will produce something signable in an hour; for a two-person business with real revenue, an hour of an attorney's time reviewing it is the better trade, and it is the only professional spend either of these two needs.

Tom — where the real question is not the one he asked. Imagine a seller shipping from a spare room to customers in forty states. He came to this article asking which formation service to use; his actual exposure is that selling into other states can create tax obligations there, and operating in another state can require foreign qualification. His filing is the same as Maya's. His homework is not, and no formation service resolves it — a sales-tax professional does.

What these assume, and what would change them. They assume a standard (non-licensed) business, one state of operation, no employees, and no outside investment. They exclude any state franchise tax, which in a small number of states is larger than everything else on the row combined. They assume you get the EIN yourself, free. Add employees and you add payroll registration; add a second state of real operations and you add a foreign-qualification filing and usually a second registered agent.

Read the rows for the pattern, not the totals: in every one, the service-vs-DIY question turned out to be smaller than the situation-specific issue in the last row. That is the general case, and it is the reason this article spends more words on what an LLC does not protect than on who files it.

What's genuinely free vs. an add-on

This is the table the "$0 LLC" marketing depends on you not seeing:

What to check: before buying any service, confirm exactly what's included versus extra — and especially the registered-agent renewal price in year two, which is where the economics of a "$0" formation actually live.

The process, start to finish

What actually happens, in order. Steps 1–5 are yours whether you DIY or pay; a service performs 4 and sometimes 6.

1. Confirm the name is available on your state's business entity search, and that it carries a required designator ("LLC").
2. Decide the registered agent — yourself, another member, or a paid service.
3. Decide management structure — member-managed for most small LLCs.
4. File the Articles of Organization with the state and pay the fee. This is the act that creates the LLC.
5. Wait for the state to approve it. You receive a stamped certificate or approval notice.
6. Get the EIN from the IRS — free, online, immediate. Do this after approval, using the exact approved name.
7. Write and sign the operating agreement. It is an internal document; you do not file it.
8. Open a business bank account using the certificate and the EIN. This is the step that makes the liability separation real rather than theoretical.
9. Check state and local requirements — a state tax registration, a local business licence, a sales-tax permit if you sell taxable goods.
10. Check whether beneficial-ownership reporting applies to you — see the callout below.
11. Diary the annual report date the day you are approved, not the month it is due.

How long each stage takes. Naming, agent and management decisions are yours and take as long as you take. Filing is minutes. Approval is the stage that varies, and no honest single number exists for it — some states approve online filings same-day or within a few business days; others take weeks for mailed filings, and every state's queue lengthens seasonally. Expedited processing is offered by most states for an extra fee. Your state's filing page states its own current processing time; that is the only figure worth having. The EIN is immediate during IRS online hours. The bank account is same-day in branch, longer online.

FinCEN publishes the current position, including who is exempt and any deadlines, on its own beneficial ownership information page. Check it before you assume you either must file or need not.

How to know you did it right

Four artifacts. If you have all four, the LLC exists, is recognised, and can operate:

1. A stamped or approved copy of your Articles of Organization from the state — not a receipt for payment, the approval itself. Look up your own entity on the state's business search and confirm the status reads Active or In Good Standing, and that the registered-agent address shown is correct.
2. An EIN confirmation letter (CP-575) from the IRS, with the entity name matching the state filing exactly. A mismatch here causes bank and tax problems later and is easiest to fix immediately.
3. A signed operating agreement, even for a single-member LLC where no state requires one — banks routinely ask for it.
4. A business bank account in the LLC's name, funded, with the business's income and expenses running through it and nothing personal. If this one is missing, the first three do not deliver what you formed the LLC for.

The test that matters six months from now: can you produce a bank statement showing no personal transactions, and do you know your annual report date without looking it up? Those two predict whether the protection holds far better than which website filed the form.

Ongoing obligations (don't forget these)

Forming the LLC is step one; keeping it in good standing is ongoing. Most states require an annual (or biennial) report and fee, and some charge a franchise tax. Keep business and personal finances separate (a dedicated business bank account) — commingling can undermine the liability protection the LLC exists to provide. These matter more than which service you used.

What "separate" concretely means: business income is deposited into the business account; business expenses are paid from it; when you pay yourself, you transfer to your personal account and record it as an owner's draw. It does not mean you can never take money out — it means the transfer is recorded as a transfer rather than the business card buying your groceries.

If you miss an annual report, most states move the entity to a delinquent status and then administratively dissolve it after a grace period. Reinstatement is normally possible for a fee, but during the lapse the liability protection you are paying for is at its weakest. Set a calendar reminder for a month before the due date on the day you are approved.

The first year, in phases

Not dates — sequence. What to focus on now versus later.

Does an LLC save you tax?

Usually not by itself, and this is the most common misunderstanding about the entity. By default a single-member LLC is a disregarded entity — the IRS treats its income as yours and you report it on your personal return exactly as a sole proprietor would. A multi-member LLC defaults to partnership treatment. Neither default changes what you owe.

What can change the calculation is an election, not the LLC itself. An LLC may elect to be taxed as an S corporation (IRS Form 2553) or, less commonly, as a corporation (IRS Form 8832). The S-corp election can reduce self-employment tax for owners whose profit is comfortably above a reasonable salary for their work — and it adds payroll, a separate return, and real administrative cost, which is why it is usually a bad trade until profit is well established.

Bottom line: form the LLC for liability protection. Treat any tax benefit as a separate question to revisit with a tax preparer once you have a full year of numbers — not a reason to form one now.

Which state should you form in?

Form in the state where you actually do business — for the overwhelming majority of readers, the state you live and work in. This is the settled answer, and the "incorporate in Delaware/Wyoming/Nevada" advice you will see is almost always wrong for a small business.

The reason is mechanical: forming in a second state does not exempt you from the first. If you operate in your home state, you must generally foreign-qualify there anyway — a second filing, a second fee, a second registered agent and a second annual report. You have then doubled the paperwork to gain benefits (Delaware's Court of Chancery, Wyoming's privacy rules) that are designed for companies with outside investors, not for a freelancer.

The exception, stated honestly: if you are raising venture capital, investors will often expect a Delaware entity. If that is you, you are also in the group that should be talking to a lawyer rather than reading this.

Alternatives to forming an LLC

An LLC is one option, not the only one. Which fits depends on liability exposure, ownership, and whether anyone is investing.

If you are converting later: moving from sole proprietorship to LLC is routine. Form the LLC, get a new EIN, move contracts, bank accounts and licences into the entity's name, and stop running business income through your personal account from that date. The transition is administrative, not legal surgery.

When to stop and hire someone

Most readers of this article do not need a lawyer. These six situations are the exceptions, and in each the cost of getting it wrong exceeds an hour of professional time:

1. Outside investors or an unequal equity split, or anything involving vesting.
2. A licensed profession — several states require a Professional LLC and restrict who may own it.
3. Real operations in more than one state, which triggers foreign qualification and multi-state tax questions.
4. Moving significant existing assets, contracts or IP into the entity.
5. A partner arrangement where anyone might want out. The operating agreement is the whole ballgame and templates handle it badly.
6. Any live dispute, claim or debt. Forming an entity does not retroactively protect you, and doing it mid-dispute can look like something worse.

What professional help costs, honestly: a formation attorney for a straightforward entity is generally a few hundred dollars and up, varying enormously by market and complexity; a CPA consultation on entity and tax treatment is typically billed hourly. Neither is "an expert or nothing" — a single paid hour to review an operating agreement is a common and sensible middle path.

Common mistakes

• Paying for an EIN. It's free from the IRS — this is the most common needless charge.
• Falling for "$0 formation" without checking the upsells and the registered-agent renewal.
• Missing annual-report deadlines and losing good standing.
• Commingling funds (mixing personal and business money), which can pierce the liability protection.
• Overpaying for a service when a simple single-member LLC is a straightforward DIY.
• Forming in Delaware or Wyoming "for the benefits" while operating somewhere else — you pay twice and gain nothing.
• Believing a DBA provides liability protection. It provides a name.
• Never signing the operating agreement because no one filed it anywhere. Banks and courts both ask for it.
• Assuming the LLC saves tax by default. It does not; only an election might, and only above a certain profit.

Putting it together

You can almost always form a simple LLC yourself for just the state fee: file the Articles of Organization with your state, be your own registered agent, and grab your EIN free from the IRS. A formation service is a fine convenience if you'd rather not deal with the paperwork — just remember that "$0" means "state fee plus upsells," so refuse the EIN charge and check the registered-agent renewal before you buy. Whichever you choose, the protection comes from forming the LLC correctly and keeping it in good standing — file your annual report and keep your finances separate, and the LLC does its job.

Your next three moves, in order: (1) look up your state's filing fee, annual report date and franchise tax on your Secretary of State's site; (2) decide DIY or service using the trade-off table above, not a star rating; (3) diary the annual report the day you are approved.

Where to go from here. If the business is still finding its footing, whether a side business earns enough to warrant an entity is the prior question. Once formed, tax software covers a single-member LLC's filing, and the SBA's launch guidance is the neutral route to your state's own requirements. For a partner arrangement or a licensed profession, the next step is a paid hour with an attorney, not another article.

Our full terms are on our disclaimer page.

FAQ

(Only questions the body doesn't fully answer.)

• Should I be my own registered agent? You can (free) in most states if you have a physical state address and are available during business hours. Use a service if you want your address kept off the public record, work from home and value privacy, or aren't reliably available — otherwise, doing it yourself is fine.
• Do I really need an operating agreement? Some states require one; even where optional, it's smart — it sets ownership and rules. For a simple single-member LLC a free template usually suffices; multi-member or complex setups are worth an attorney's review.
• Is an LLC worth it for a tiny side business? It depends on your liability risk — if the business could realistically be sued or take on debt, the protection is valuable. For a zero-risk hobby earning a little, it may be premature; weigh the state fee and annual obligations against your actual risk.
• Can I form the LLC in a cheaper state to save on fees? Usually not worth it — you generally must register (and pay) in the state where you actually do business anyway, so "cheap state" shopping often adds cost and complexity rather than saving it.
• Can I change my registered agent later? Yes, in every state, by filing a change-of-agent form and usually a small fee. This matters if you start with a service's promotional first year and want to move off it before the renewal price applies.
• What if my business name is already taken? Pick another, or check whether your state allows a distinguishable variant. Separately, state availability is not a trademark clearance — a name can be available to register and still infringe someone's mark.
• Do I need a new EIN if I convert from a sole proprietorship? Generally yes — the LLC is a new entity. Apply after the state approves the formation, using the exact approved name.
• How do I close an LLC I no longer need? File articles of dissolution with the state, settle debts and final tax filings, and cancel licences and registrations. Simply not filing the annual report leaves you delinquent rather than closed, and can accrue penalties.