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Startup Depotby Angelic
Step 3 of 5

Set up your business structure

When the business starts taking real money, the legal and tax side starts to matter. This step covers forming a business entity, getting an EIN, and opening a separate bank account.

Picking a tool? Jump to the comparison for this step.

What this step covers

  • Why most small businesses end up forming an LLC.
  • Filing the LLC yourself versus using a formation service.
  • Getting your free EIN from the IRS.
  • Opening a business bank account, kept separate from personal money.
  • When to bring in a CPA or an attorney.

When to do this

You do not have to do this on day one. You do need to do it before you make real money or sign real contracts.

How to set up your business structure

  1. 1

    Understand what an LLC actually does

    An LLC (limited liability company) puts a legal wall between your business and your personal stuff. If the business owes money or gets sued, that wall is what keeps your house and personal savings out of reach — as long as you keep business and personal money separate (more on that below).

    It's the most common choice for small businesses because it's simpler and cheaper than a corporation but still gives you that protection. It is not the only option, and it's not legal advice — but for a solo owner starting out, it's the usual answer.

  2. 2

    Choose: file it yourself, or use a formation service

    Filing yourself means going to your state's Secretary of State website, filling out the Articles of Organization, and paying the state fee directly. It's cheaper (you pay only the state) and not hard for a simple single-owner LLC.

    A formation service fills out and files the paperwork for you, and usually offers a registered agent (a required public contact for legal mail) and reminders to keep your LLC in good standing. It costs more but removes the guesswork. Our business formation comparison below covers which service fits which kind of owner.

  3. 3

    File the LLC with your state

    Pick your business name and confirm it's available on your state's business search. File the Articles of Organization (online in most states) and pay the state filing fee — this varies a lot by state, from under $100 to a few hundred dollars.

    Most states also ask for a registered agent and, in many states, an annual report and fee to stay active. Write down the renewal date the day you file, so the LLC doesn't quietly lapse a year later.

  4. 4

    Get your EIN from the IRS — free

    An EIN (Employer Identification Number) is your business's tax ID, like a Social Security number for the company. You need it to open a business bank account, hire anyone, and fill out the W-9 form affiliate programs and clients require.

    Get it free, directly from the IRS website (irs.gov), in about fifteen minutes. Never pay a third-party site for an EIN — it's a free government service. Do this right after the LLC is approved.

  5. 5

    Open a separate business bank account

    Take your approved LLC paperwork and your EIN to a bank and open a business checking account. From now on, every dollar the business earns or spends goes through this account — never your personal one.

    This separation is not optional bookkeeping nicety: mixing the money is the fastest way to lose the legal protection the LLC gave you in the first place. One business account, one business card, kept clean, makes taxes and the legal wall both work.

  6. 6

    Know when to call a CPA or attorney

    You can do most of this yourself. Bring in a CPA (accountant) when the tax picture gets real — choosing how your LLC is taxed, handling payroll, or planning for a profitable year. Bring in an attorney for partnership agreements, real contracts, or anything where a mistake is expensive to undo.

    Paying a professional for a one-hour review at the right moment is cheap compared to fixing a structure problem later.

What this step costs

State filing fee: anywhere from under $100 to a few hundred dollars, depending on your state. This is unavoidable and goes to the state, not to any service.

Formation service (optional): typically $0–$300 plus the state fee, depending on the package. The free or low-cost tiers cover the basic filing; higher tiers add registered agent and compliance reminders.

EIN: free, always, directly from the IRS. Annual report or franchise fees may apply in your state to keep the LLC active — budget for that yearly, not just the first time.

Common mistakes

  • Mixing business and personal money in the same account.
  • Filing the LLC and then forgetting to keep it in good standing each year.
  • Skipping the operating agreement, which banks and partners often ask for.
  • Paying a third-party site for an EIN that the IRS gives away for free.
  • Forming the LLC in a 'cheaper' state you don't live in, then owing fees in both states.

Question to close this step

Are you ready to file the LLC yourself, or would you rather use a service that handles the paperwork?

Tools for this step

When you are ready to choose a tool, our comparison page walks through what to look for and how the common options stack up.

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