How to Set Up an LLC for Freelancing: A 30-Minute Guide
I formed my LLC in month 18 of freelancing, after landing a $5,000 project that made me think seriously about liability. The process took 30 minutes online and cost $125 in North Carolina. Looking back, I should have done it around month 6 — but it’s not something to stress about on day one.
Here’s when you need one, how to set it up, and the mistakes to avoid.
When You Need an LLC (And When You Don’t)
You probably need an LLC if:
- You’re signing contracts over $5,000 (risk increases with project size)
- You have personal assets to protect (home, savings, investments)
- A client requires it (some enterprise clients only work with LLCs)
- You’re considering S-Corp election later (LLC is the vehicle)
- You want to open business credit accounts
You probably don’t need one yet if:
- You’re just starting out with small projects
- You have minimal personal assets
- Your clients are individuals, not companies
- Money is extremely tight (the fees matter more early on)
Important: An LLC doesn’t change your taxes. A single-member LLC is a “disregarded entity” for federal tax purposes. Same Schedule C, same SE tax, same everything. The LLC provides liability protection only.
Step-by-Step: Forming Your LLC
Step 1: Choose Your State ($0, 5 minutes)
Form in the state where you live and work. Period. Don’t fall for the “form in Delaware/Wyoming” advice unless you have a specific reason.
Step 2: Choose a Name ($0, 5 minutes)
Your LLC name must be unique in your state. Check availability on your state’s Secretary of State website. Most freelancers use their name: “[Your Name] LLC” or “[Your Name] Design LLC.”
Step 3: File Articles of Organization ($50-500, 15 minutes)
Go to your state’s Secretary of State website. Find the “Form an LLC” section. Fill out:
- LLC name
- Registered agent (yourself, at your home address, is fine for most freelancers)
- Management type (member-managed for solo freelancers)
- Organizer information
Pay the filing fee. Submit. You’ll receive confirmation within days (some states, instantly).
Filing fees by popular states:
| State | Filing Fee | Annual Fee |
|---|---|---|
| California | $70 | $800 minimum franchise tax |
| Colorado | $50 | $10/year |
| Florida | $125 | $138.75/year |
| New York | $200 | $25 + publication (~$1,500) |
| North Carolina | $125 | $200/year |
| Texas | $300 | No annual fee |
| Wyoming | $100 | $60/year |
Step 4: Get an EIN ($0, 5 minutes)
If you haven’t already, get an EIN at irs.gov. Free, instant.
Step 5: Create an Operating Agreement ($0-200, 15 minutes)
Even for a single-member LLC, an operating agreement documents how the business operates. Some banks require it. Free templates are available online, or use a lawyer template.
Step 6: Open a Business Bank Account ($0, 20 minutes)
Use your LLC name and EIN to open a business checking account. Relay, Mercury, or Novo — all free.
Step 7: Update Your Business Operations
- Update invoices with LLC name
- Update contracts to reference the LLC
- Update W-9 with LLC name and EIN
- Get business insurance (general liability: $300-600/year)
Mistakes I Made
Mistake 1: Waiting too long. I freelanced for 18 months without liability protection. One bad client or one lawsuit during that time could have put my personal assets at risk.
Mistake 2: Not getting business insurance. An LLC protects personal assets from business liability, but insurance protects the business itself. General liability insurance costs $300-600/year and covers many scenarios the LLC doesn’t.
Mistake 3: Commingling funds. For the first month after forming the LLC, I still mixed business and personal expenses in one account. This can “pierce the corporate veil” — meaning a court could ignore the LLC’s liability protection. Separate accounts are essential.
LLC Maintenance
Annual requirements vary by state:
- Annual report/fee: Most states require an annual filing and fee ($0-800)
- Registered agent: Maintain a registered agent in your state of formation
- Separate finances: Keep business and personal accounts separate
- Meeting minutes: Some states require annual meeting records (even for single-member LLCs)
Total annual cost for my NC LLC: $200 (annual report) + $0 (I’m my own registered agent) = $200/year. Worth it for the liability protection.
The Bottom Line
An LLC takes 30 minutes to set up and costs $50-500 depending on your state. It protects your personal assets from business liability. It doesn’t change your taxes.
Form one when you have assets to protect and contracts worth protecting against. Until then, sole proprietorship is fine. And when you do form the LLC, keep your finances separated — that’s what makes the liability protection actually work.