How to Start an LLC for a Consulting Business
Updated June 2026 · Reviewed by the Hustle Copilot editors
Consultants give advice for money, and bad advice gets sued. An LLC keeps a malpractice claim out of your personal finances. It also makes you look legitimate enough for Fortune 500s to actually sign your contract.
Why you need an LLC for this
- Errors & omissions claims stay with the business
- Big clients require an entity on the MSA (master services agreement)
- S-corp election saves significant self-employment tax once profit clears $50K
- Cleaner expense deductions for travel, home office, software, training
The tax angle
Consultants are the textbook S-corp election candidate. Once net consulting income is consistently above $50K, S-corp election typically saves $5K–$15K/year in self-employment tax. Set up payroll for yourself first.
Step-by-step
- Step 1Pick a state to form in
For most consultant owners, your home state is the right answer. Forming in Delaware or Wyoming sounds clever, but if you operate from another state you'll have to register as a foreign LLC there too — double the fees and paperwork.
- Step 2Name your LLC
Search your state's business database to make sure the name is available. It must include 'LLC' or 'Limited Liability Company.' Avoid restricted words (Bank, Insurance, etc.) unless you have the right licenses.
- Step 3File your Articles of Organization
This is the legal document that creates your LLC. Filing fees range from $40 to $500 depending on the state. Most states process online filings within a few business days.
- Step 4Get an EIN from the IRS
Free at IRS.gov. Takes 5 minutes. You need it to open a business bank account, hire employees, and file taxes.
- Step 5Open a business bank account
Critical for the liability shield. The moment you mix personal and business money, a lawyer can argue your LLC is a sham and pierce the veil. Keep it separate from day one.
- Step 6Get E&O (errors & omissions) insurance
An LLC handles legal structure; E&O handles the dollar amounts. Most enterprise clients require $1M+ in E&O coverage in writing before signing.
- Step 7Skip all of that and use Tailor Brands
Tailor Brands files your Articles of Organization, gets your EIN, sets up your registered agent, and drafts your operating agreement in one flow. Most people finish in under 15 minutes. If you'd rather not deal with state websites, this is the fastest path.
What people get wrong
- Signing big contracts in your personal name out of habit
- Skipping E&O insurance because 'I have an LLC' (the LLC doesn't pay the claim — insurance does)
- Not electing S-corp once profit clearly justifies it
FAQ
When should a consultant elect S-corp status?
Once net profit is consistently above $50K. Below that, the cost of running payroll usually eats the tax savings.
Single-member LLC enough for consulting?
Yes. Most consultants are single-member LLCs taxed as S-corps once profit grows. No partner required.