Professional and creative · LLC guide · updated
How to start an LLC for a software development business
Developers write code clients depend on, and bugs can cost clients money or expose user data. An LLC is the party to the contract and the owner of the code you build before you assign it. It also gives you a clean base if you later raise money or sell an app.
Our registered agent is optional: $74.25 a year, the same at renewal. Questions first? Ray or Vinny picks up at (954) 470-8356.
- EIN
- IP assignment
- Client MSA
- Privacy policy
- Tech E&O
Software Development Business businesses in the U.S.
Source: U.S. Census Bureau, County Business Patterns 2022 (NAICS 541511) and U.S. Census Bureau, Nonemployer Statistics 2022 (NAICS 54151), the latest U.S. totals.
Why software development business owners form an LLC
Bugs and downtime
Claims that software failures caused a client loss.
User data
Apps that collect personal data carry privacy and breach risks.
IP ownership disputes
Unclear ownership between you, clients and contractors.
An LLC keeps the company's debts and claims away from your personal assets when you run it as its own business: its own bank account, contracts signed in its name, and no mixing of money. It does not cover your own negligence, and lenders often ask for a personal guarantee. Insurance comes first.
Licenses and registrations for a software development business
Federal items link to the agency's own page. State and local rules vary, so pick your state at the top for your state's business portal. Tick items off as you go; the list remembers your progress on this device.
- We do thisForm the LLC and get its EINAlmost every registration above asks for the company's legal name and EIN, so this comes first. We file the LLC with your state for $123.75 plus the state fee, and can get the EIN for $41.25; the IRS also issues it free online.
Insurance and taxes to plan for
Insurance
- Technology E&O
Covers claims that your software or service caused a client loss.
- Cyber liability
Covers breach response and data claims.
- General liability
Often required by enterprise clients.
Taxes
- Software development costs
Under current law, domestic research and experimental costs, which include software development, can again be deducted in the year paid starting in 2025. Ask a CPA how this applies to you. IRS / agency page
- R&D credit
Qualifying development work may earn a federal research credit.
Have every contractor and co-founder sign an agreement assigning their code to the LLC. Without it, a contractor may own part of your product, which blocks investment and sale.
Forming the LLC itself: 7 steps in every state
- 1. Check the name
- 2. Name a registered agent
- 3. File with the state
- 4. Sign an operating agreement
- 5. Get an EIN
- 6. Open a bank account
- 7. Keep it in good standing
The filing office, fee and yearly report change by state. Open your state's step-by-step guide.
What it costs to form a software development business LLC
| Cost | File it yourself | With Vermilion Vitez |
|---|---|---|
| State filing fee (paid to the state) | $35 to $520 | $35 to $520 |
| Filing service, operating agreement included | $0 | $123.75 |
| EIN from the IRS | $0 | $0 yourself, or $41.25 if we get it |
| Registered agent, per year (optional) | $0 if you serve yourself | $74.25 |
State fees as charged at our checkout. Industry licenses, permits, bonds and insurance above are separate and set by each agency. Checkout shows the card processing fee before you pay.
Frequently asked questions
Should a freelance developer form an LLC?
Many do, to separate money, sign client contracts and keep liability with the company.
LLC or C corporation for a software startup?
An LLC is simpler for client work and bootstrapped products. If you plan to raise venture capital, investors usually want a Delaware C corporation; you can convert later.
Who owns code I write for clients?
Whatever your contract says. Without a written assignment, the developer often keeps copyright. Put ownership in the master services agreement.
Do I need a privacy policy for my app?
Yes, if it collects any personal information. App stores and many state laws require one.
How much does it cost to form an LLC for a software development business?
Your state's filing fee ($35 to $520 depending on the state) plus $123.75 if we file it, with the operating agreement included. Industry licenses, bonds and insurance are extra and set by each agency.
Is this page legal or tax advice for my software development business?
No. It summarizes public rules in general terms, with links to the agencies that set them. For your situation, talk to a licensed attorney or CPA, or book a free call with us.
Related industries
Ready when you are
Have us file your Software Development Business LLC
$123.75 plus your state's filing fee, with the operating agreement included. Checkout shows the full total, card processing fee and all, before you pay.
Rather talk first? Call Ray or Vinny at (954) 470-8356.