1. Creating Your Own LLC
2. Hiring a Lawyer
3. Using an Incorporation Service
4. Forming an LLC in Another State
5. What Not to Do When Forming an LLC
6. Considerations

The best way to form an LLC is to keep costs low at the beginning of your business formation, since new business owners often find money to be a problem. There are several ways you can form an LLC on a budget.

Creating Your Own LLC

Doing your own LLC formation documents can be the most cost-effective method, as each state charges different LLC formation fees. Filing an LLC is not very complicated, as many states give you the option to download the forms online, which are easy to fill out. In some cases, you can even form your LLC completely online. 

Hiring a Lawyer

In some cases, you may have questions or problems in forming your LLC. You might not need a lawyer for the entire process, but legal advice for certain aspects of your LLC could be very helpful.

Using an Incorporation Service

Bringing in an incorporation service provider is another option to form an LLC on a budget. These services are found online and provide a specific service of forming an LLC. Although these services can be helpful in creating an LLC, it's important to understand they do not offer legal assistance.

Forming an LLC in Another State

Since each state is different when it comes to LLC fees as a whole, there is a possibility to choose in which state to incorporate your LLC and save on filing fees. 

  • However, opening an LLC in another state can incur fees and paperwork that you might not have if you file in your home state. 
  • An example of this is if you are running a local business but decide to incorporate elsewhere, your qualification will be different, and you must obtain a foreign qualification. This means extra fees and paperwork to fill out, which add up in cost and time and might not be worth the initial filing fee savings.
  • The tax differences in forming in another state are another possibility for saving money. You have to consider the tax implications that vary from state to state. 
  • This is where getting help from a professional accountant can be a good idea. At the beginning of any business, the upfront costs have to be reduced in order to keep capital open for other underlying costs.

What Not to Do When Forming an LLC

  • Selecting the wrong business entity. The LLC, S, and C Corporations are the most common types of businesses in the U.S., but they have different purposes. The LLC is great for small businesses that want liability protection. 
  • Starting an LLC in the wrong state. Delaware and Nevada are well known for their positive statutes and low corporate income taxes. However, incorporating in another state is often more beneficial for larger businesses.
  • Running a business without a license. Most businesses are going to need some sort of license to comply with local, state, or federal laws. This is separate from forming your LLC. Licenses are for the most part not expensive and can keep you from paying expensive fines.
  • Not making your LLC compliant. In order to keep business funds separate from personal assets, you have to sign with your business title, register your DBA (Doing Business As), and send an annual report to the state, as well as file for foreign qualification if operating in a different state, and updating the state with an Articles of Amendment document.
  • Believing your LLC liability protection transfers to you. Your LLC cannot protect you from unlawful acts you might commit.
  • If you assume your business is not big enough to form an LLC, you run the risk of mixing your personal and professional assets. It doesn't take long to form an LLC, and it has many legal advantages.


An LLC is a popular structure for small businesses. The requirements do vary according to the state you form in, but for the most part, it is a relatively easy process that can be done in an hour or so. If your LLC is creating high revenue, you can consider forming elsewhere. It is best to form your LLC in your state if you are a small business, given the unknown costs associated with a different state. 

If you need help with forming an LLC, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.