diff --git a/crates/llm/Cargo.toml b/crates/llm/Cargo.toml
new file mode 100644
index 0000000..73de29f
--- /dev/null
+++ b/crates/llm/Cargo.toml
@@ -0,0 +1,6 @@
+[package]
+name = "kon-llm"
+version = "0.1.0"
+edition = "2021"
+
+[dependencies]
diff --git a/crates/llm/src/lib.rs b/crates/llm/src/lib.rs
new file mode 100644
index 0000000..cd25547
--- /dev/null
+++ b/crates/llm/src/lib.rs
@@ -0,0 +1,73 @@
+use std::sync::{Arc, Mutex};
+
+struct LlmState {
+    loaded: bool,
+}
+
+/// Shared handle to the LLM engine. Cheap to clone (Arc).
+/// Phase 3 will replace the stub body with a real llama-cpp-2 model.
+#[derive(Clone)]
+pub struct LlmEngine {
+    state: Arc<Mutex<LlmState>>,
+}
+
+impl LlmEngine {
+    pub fn new() -> Self {
+        Self {
+            state: Arc::new(Mutex::new(LlmState { loaded: false })),
+        }
+    }
+
+    pub fn is_loaded(&self) -> bool {
+        self.state.lock().unwrap().loaded
+    }
+
+    /// Break a task description into 3-7 physical micro-steps.
+    /// Returns Err if no model is loaded — the caller surfaces this to the UI.
+    pub fn decompose_task(&self, _task_text: &str) -> Result<Vec<String>, String> {
+        if !self.is_loaded() {
+            return Err(
+                "Download an AI model in Settings to break down tasks.".to_string(),
+            );
+        }
+        // Phase 3: call llama-cpp-2 with GBNF-constrained prompt here.
+        Err("LLM not yet wired.".to_string())
+    }
+}
+
+impl Default for LlmEngine {
+    fn default() -> Self {
+        Self::new()
+    }
+}
+
+#[cfg(test)]
+mod tests {
+    use super::*;
+
+    #[test]
+    fn decompose_returns_error_when_not_loaded() {
+        let engine = LlmEngine::new();
+        assert!(!engine.is_loaded());
+        let result = engine.decompose_task("Write a blog post");
+        assert!(result.is_err());
+        assert!(
+            result.unwrap_err().contains("Download an AI model"),
+            "error message should tell user to download a model"
+        );
+    }
+
+    #[test]
+    fn default_creates_unloaded_engine() {
+        let engine = LlmEngine::default();
+        assert!(!engine.is_loaded());
+    }
+
+    #[test]
+    fn engine_is_clone_and_shares_state() {
+        let engine = LlmEngine::new();
+        let clone = engine.clone();
+        // Both point to the same Arc — neither is loaded
+        assert!(!clone.is_loaded());
+    }
+}
diff --git a/src-tauri/Cargo.toml b/src-tauri/Cargo.toml
index 31857a5..3596376 100644
--- a/src-tauri/Cargo.toml
+++ b/src-tauri/Cargo.toml
@@ -21,6 +21,7 @@ kon-ai-formatting = { path = "../crates/ai-formatting" }
 kon-storage = { path = "../crates/storage" }
 kon-cloud-providers = { path = "../crates/cloud-providers" }
 kon-hotkey = { path = "../crates/hotkey" }
+kon-llm = { path = "../crates/llm" }
 
 # Tauri
 tauri = { version = "2", features = ["tray-icon"] }