One of the biggest milestones of building a business is registering it as a formal legal entity. Limited liability companies are one of the most popular business structures, with more than 21.6 million registered LLCs in the US in 2021.

Forming an LLC does not have to be an overwhelming or complicated process. Here's a complete guide to everything you need to know about forming an LLC for your business – and making your LLC status work for you.

What's in this article?

• What is an LLC in America?
  
• What are the benefits of forming an LLC?
  
• How to create an LLC:
  
  • Conduct an LLC name search
    
  • Register the DBA name
    
  • Register a domain name
    
  • File articles of organisation
    
  • Assign a registered agent
    
  • Write an operating agreement
    
  • Fulfil the publication requirements
    
  • Obtain a business licence and permits
    
  • Get an Employer Identification Number (EIN)
    
  • Register your LLC with your state's department of labour
    
  • Open a business bank account
    

What is an LLC in America?

An LLC in America, or a "limited liability company", is a US business structure that combines aspects of a corporation with a partnership or sole proprietorship into a hybrid entity that protects its owners from liability.

What are the benefits of forming an LLC?

In most cases, it's in your best interest to set up an LLC for your business. Even if there's no regulatory requirement to set up an LLC, there are significant benefits to doing so.

• Limited liability
  An LLC establishes your business as a legal entity that is distinct from you as its owner. Forming an LLC protects you personally from liability in matters concerning your business, from paying taxes to getting sued.

• Clarity with business partners
  If you co-own your business with partners, the LLC set-up process will prompt you to have a lot of practical conversations. Who's responsible for what? What happens if someone decides to leave the business? How are profits shared? Even if you think you and your partners are aligned, it's good to put these decisions in writing, which you'll do as part of the LLC set-up process.

• Claiming your business name
  You'll choose a business name, formally register that name, solidify a business entity around it and make it legally your name.

• Fundraising gets easier
  Planning on taking out loans or raising outside investment capital to power business growth? Being on the LLC register makes you more legitimate in the eyes of potential lenders or investors, compared to fundraising as an individual.

How to create an LLC

Below are the key steps for how to create an LLC for your business. The specific rules and regulations for forming and running an LLC will vary, depending on which state you're located in.

Conduct an LLC name search

Before officially setting up your limited liability company, you'll first need to decide on the name you're going to use. The official LLC register name for your business might be the same as the name you operate under, but it's also common for businesses to operate using a "doing business as" (DBA) or "trade" name. This is a public-facing name that's different from the name used in the LLC register. For example, the official LLC register name that you're filing for your business could be Jack's Snacks LLC, but you're planning to run a sandwich shop called Jack's Sandwich Supreme.

While deciding on a name is partly a creative exercise, there are several technical issues you'll also need to consider:

• Restricted words: Most states have lists of restricted words that can't appear in LLC names. Make sure that you check your state's list before committing to a name for the LLC register.
  
• Trademarks: Your business name can't infringe on any existing trademarks. Business owners can research potential names using the Trademark Electronic Search System (TESS), a database of registered trademarks and prior pending trademark applications maintained by the US Patent and Trademark Office.
  
• Name availability in your state: You also need to check whether the name is currently being used in your state. The best way to check name availability is through your state's business office.
  

Register the DBA name

If you're planning to operate your business using the same name that you're using in the LLC register, you can ignore this step. But if you're doing business under a different name, you'll probably need to register a DBA name in addition to filing your articles of organisation. Not every state requires this, so check with your state to find out its policies.

Register a domain name

After you've confirmed your desired business name isn't in conflict with any trademarks and is free to use in your state, it's a good time to claim your online presence by registering a domain name (or a few of them) for your business website. It's not a required step when forming an LLC, but it's something you'll want to do sooner rather than later to ensure that you get the domain name you want.

File articles of organisation

In most states, you can complete articles of organisation by downloading and submitting a fairly simple document online. The exact information required in this document will vary from state to state, but all of them will require a few basic details:

• Your business name
  
• The address where your business will be registered (which may or may not be where your physical business is located)
  
• Your name and the names of any other officers
  

After filling in the form, you'll submit it, along with any required filing fees, to the Secretary of State's office for the state in which you're filing. The Small Business Administration (SBA) has a list of links to business offices for each state. This is a great place to start learning everything that's required to file articles of incorporation in your state.

Assign a registered agent

Most states require businesses that are LLCs to appoint one person as a registered agent. This agent serves as the official point of contact to receive things such as service of process notices, compliance-related documents and communications from any government agencies. This person acts and communicates on behalf of the business and is sometimes one of the members of the LLC that are listed in the articles of incorporation.

Write an operating agreement

An operating agreement is a document that lays out the structure of key business operations and internal decision-making. What an operating agreement looks like can vary across businesses, but most of them include the following items:

• Percentage ownership among members
  
• Members' powers and responsibilities
  
• Voting rights
  
• Rules about transfer of members' ownership
  

Not every state requires businesses to create an operating agreement in order to set up an LLC. But even if your state doesn't, it's a useful document that's worth creating.

Fulfil the publication requirements

Some states require businesses to publish a public notice that announces the formation of a new LLC, usually in a local newspaper. Your state's filing office can give you details on how to fulfil this requirement, including where and when publication must occur and whether you'll need to publish more than once.

Obtain a business licence and permits

Depending on the type of business you have and the state in which you're operating, you might need to obtain additional business licences and permits after you've registered your business as an LLC. The SBA also maintains a list of state business licence offices that you can use to research licensing requirements.

Get an Employer Identification Number (EIN)

In order to pay taxes as a limited liability company, you'll need to obtain a federal tax ID, known as an employer identification number (EIN). This is your business's version of a Social Security number. You will use it to pay taxes, to open a business bank account or to apply for loans.

Register your LLC with your state's department of labour

In most states, if your business has employees, you'll also need to register your LLC with the state's department of labour. If you're a sole proprietor, then you probably don't need to do this step.

Open a business bank account

Now that your LLC is a legally distinct entity, it's important to set up everything the business needs to operate financially separately from you and the other members. The first and highest-priority step is opening a business bank account to serve as the home base of your limited liability company's financial operations.

After opening a business bank account, there are other secondary steps that you'll probably want to take to build your business's financial foundation, such as getting a company credit card and onboarding with a payments processor such as Stripe.

How Stripe can help

Stripe Atlas makes it simple to incorporate and set up your company so you're ready to charge customers, hire your team and fundraise as quickly as possible.

Fill out your company details in the Stripe Atlas form in less than ten minutes. Then, we'll incorporate your company in Delaware, get your IRS tax ID (EIN) for you, help you purchase your shares in the new company with one click and automatically file your 83(b) tax election. Atlas offers multiple legal templates for contracts and hiring, and can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

Atlas founders also gain access to exclusive discounts at leading software partners, one-click onboarding with selected partners and free Stripe payments processing credits. Start your company today.

The Stripe Atlas application

It takes less than ten minutes to fill out the details of your new company. You'll choose your company structure (C corporation, limited liability company or subsidiary) and pick a company name. Our instant company name checker will let you know if it's available before you submit your application. You can add up to four additional cofounders, decide how you split equity between them and reserve an equity pool for future teammates if you choose. You'll appoint officers, add an address and phone number (founders are eligible for one year of a free virtual address if you need one), and review and sign your legal documents in one click.

Forming the company in Delaware

Atlas will review your application and file your formation documents in Delaware within one working day. All Atlas applications include expedited 24-hour processing service at the state, for no extra fee. Atlas charges US$500 for your formation and your first year of registered agent services (a state compliance requirement), and US$100 each year thereafter to maintain your registered agent.

Getting your IRS tax ID (EIN)

After your formation in Delaware is complete, Atlas will file for your company's IRS tax ID. Founders who provide a US Social Security number, US address and US phone are eligible for expedited processing; all other users will receive standard processing. For standard orders, Atlas calls the IRS to retrieve the EIN for you, using real-time IRS data to determine when your filing is likely to be available. You can read more about how Atlas retrieves your EIN and view current tax ID ETAs.

Purchasing your shares in the company

After Atlas forms the company, we'll automatically issue shares to the founders and help you purchase them so you formally own your share in the company. Atlas allows founders to purchase their shares with intellectual property in one click and reflect this in your company documents, so you don't need to mail and track cash or check payments.

Filing your 83(b) tax election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. Atlas can file and mail your 83(b) tax election in one click for both US and non-US founders—no trip to the post office required. We'll file it using USPS Certified Mail with tracking, and you'll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner perks and discounts

Atlas partners with a range of third-party tools to offer special pricing or access to Atlas founders. We offer discounts on engineering, tax and finance, compliance and operations tools, including OpenAI and Amazon Web Services. Atlas also partners with Mercury, Carta and AngelList to provide faster, automatic onboarding using your Atlas company information, so you can get ready to bank and fundraise even faster. Atlas founders may also access discounts on other Stripe products, including up to one year of free credits toward payments processing.

Read our Atlas guides for startup founders, or learn more about Stripe Atlas and how it can help you set up your new business quickly and easily. Start your company now.