Registering your business as a formal legal entity is one of the biggest milestones for an entrepreneur. On average, around 5.1 million businesses are formed every year in the US, and many of them are LLCs.

Forming an LLC doesnt have to be an overwhelming or complicated process. Below, well cover what you should know about forming an LLC for your businessand making your LLC status work for you.

What's in this article?

• What is an LLC?
  
• What are the benefits of forming an LLC?
  
• How to form an LLC step-by-step
  
• How Stripe Atlas can help
  

What is an LLC?

An LLC (limited liability company) is a type of business structure in the US that, in most cases, protects its owners from being personally responsible for the companys debts or legal issues. It combines the legal protection of a corporation with the simplicity and flexibility of a sole proprietorship or partnership. You can form an LLC by registering your business with your state, which usually requires filing a simple form and paying a fee.

What are the benefits of forming an LLC?

In many cases, forming an LLC for your business brings significant benefits. These include:

• Protecting your personal assets
  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.

• Creating clear agreements with business partners
  If you co-own your business with partners, the process of setting up an LLC will prompt you to have a number of important, practical conversations. Whos responsible for what aspect of the business? What happens if someone decides to leave the business? How are profits shared? Even if you think you and your partners are aligned, its a good idea to put these decisions in writing, which youll do as part of the LLC formation process.

• Securing and legally protecting 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.

• Improving credibility with lenders and investors
  If youre planning on taking out loans or raising outside investment capital to power business growth, being a registered LLC makes you more legitimate in the eyes of potential lenders or investors, compared to fundraising as an individual.

How to form an LLC step-by-step

Below are the key steps to forming an LLC. The specific rules and regulations for forming and running an LLC will vary, depending on the state.

1. Conduct an LLC name search

Before officially forming your LLC, youll first need to decide on the name youll use. While deciding on a name is in part a creative exercise, there are several technical issues youll need to consider:

• Restricted words: Most states have lists of restricted words that cant appear in LLC names. Be sure to check your states list before committing to a name.
  
• Trademarks: Your business name cant 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 to conduct an LLC name search. You can do this by searching for the name in your states business entity database, which can usually be found on your states Secretary of State website. If the name you have in mind is in use by another LLC or corporation, youll likely need to make some changes to your desired name or choose a different one.
  

2. Register the DBA name

The name you officially register for your business might be the same name you operate under, but its also common for businesses to operate using a doing-business-as (DBA) or trade name. This is a public-facing name thats different from the name the LLC is registered under. For example, the official name youre filing for your business could be Jacks Snacks LLC, but youre planning to run a sandwich shop called Jacks Sandwich Supreme.

If youre planning to operate your business using the same name youre registering for your LLC, you can ignore this step. But if youre doing business under a different name, youll likely 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. Registering a DBA name will usually cost around $10$100, depending on your state or county.

3. Register a domain name

After youve confirmed that your desired business name isnt in conflict with any trademarks and is free to use in your state, its a good time to claim your online presence by registering a domain name (or a few of them) for your business website. Even though registering a domain name is not required in order to form an LLC, registering your domain early helps protect your brand online and ensures that no one else claims the web address you want. Your domain name will be the foundation of your digital presence and used for your website, email, marketing, and more. Even if you dont plan to build your website right away, claiming your domain ensures its yours when youre ready. Many domain names cost just $10$20 per year, depending on the registrar and your domain name extension (such as .com or .co).

4. File articles of organization

In most states, you can complete articles of organisation by downloading and submitting a 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
  

Youll submit the form, along with any required filing fees, to the Secretary of States office for the state in which youre filing. Registering an LLC, including the business name, typically costs anywhere between $50 and $500, depending on which state youre filing in. The Small Business Administration (SBA) has a list of links to business offices for each state. This is a great place to start learning whats required to file articles of incorporation in your state.

5. Assign a registered agent

Most states require LLCs to appoint one person as a registered agent. This agent serves as the official point of contact to receive things like 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 LLCs members listed in the articles of incorporation.

You can assign a registered agent by filling out a simple form, which is typically available on your states website. Depending on your state, youll be able to either submit the form online, deliver it in person, or mail it in. A registered agent can be an individual or a business entity. If the registered agent is an individual, they dont need to be an employee or owner of the LLC (they can even be a family member), but theyll usually need to meet the following requirements:

• Be least 18 years old
  
• Have a physical address (not a PO Box) in the state where the LLC is registered
  
• Be available during typical business hours to receive any mail or official documents
  

6. 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 form an LLC. But even if your state doesnt require it, having an operating agreement can be a good idea for businesses. If your LLC involves multiple members or any complex circumstances, consider using an attorney to help draft the agreement. Depending on how many members are in your LLC, the complexity of your situation, and which state youre in, having an agreement fully drafted by a lawyer can cost anywhere from around $400 to $5,000.

Entrepreneurs with single-member LLCs might be more likely to create their own document using a template, but it can still be a good idea to have a lawyer review the finished agreement. Once the operating agreement is complete, all members and any managers of the LLC should sign it.

7. Fulfil the publication requirements (if your state requires it)

Some states require new LLCs to publish a public notice in a local newspaper announcing their formation.

For example, in New York, LLCs must publish notices in two newspapers, and it must be done in the county where the LLC is located. The cost can vary significantly depending on the county and publication, from $200 to over $1,500 in some parts of New York City.

To ensure compliance, check with your states Secretary of State or business filing office. The office can provide:

• A list of approved newspapers
  
• How many times you need to publish
  
• How to submit proof of publication (often a notarised affidavit or certificate)
  

Failure to meet the publication requirement in these states could jeopardise your LLCs standing or delay its full formation.

8. Obtain a business licence and permits

Depending on the type of business you have and the state in which youre operating, you might need to obtain additional business licences and permits after youve registered your LLC. These requirements can vary widely depending on:

• Your industry (e.g., food service, child care, construction, retail, healthcare)
  
• Your business activities (e.g., selling products, handling hazardous materials, hiring employees)
  
• Your location (state, county, and even city-level rules can differ)
  

The SBA also maintains a list of state business licence offices that you can use to research licensing requirements. Costs of these licences can range from $0 to several hundred dollars, depending on whats required and how many licences you need to obtain or renew annually.

9. Get an Employer Identification Number (EIN)

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

You can file for an EIN by filling out a form directly on the IRS website. Youll be prompted to provide some basic information about your LLC and about why youre applying for an EIN. Once you submit, youll receive your new EIN in minutes. You can also apply for an EIN via physical mail, but it will take you about four weeks to receive your EIN by mail.

10. Register with your states department of labour

In most states, if your business has employees, youll also need to register with the states department of labour. If youre a sole proprietor or single-member LLC with no employees, then you probably dont need to do this step. But if you plan to hire even one person, including on a part-time or seasonal basis, youre required to register.

Registering with the department of labour allows you to:

• Report employees wages
  
• Pay state employment taxes
  
• Comply with unemployment insurance and workers compensation laws
  
• Meet wage, hour, and labour law requirements
  

You can find your states department of labour website here.

11. Open a business bank account

Now that your LLC is a legally distinct entity, its important to set up everything the business needs to operate financially. The first and highest-priority step is opening a business bank account to serve as the home base of your LLCs financial operations.

After opening a business bank account, there are other steps youll probably want to take to build your businesss financial foundation, such as getting a company credit card and onboarding with a payments processor like Stripe.

How Stripe Atlas can help

Stripe Atlas sets up your company's legal foundations so you can fundraise, open a bank account and accept payments within two business days from anywhere in the world.

Join 80K+ companies incorporated using Atlas, including startups backed by top investors like Y Combinator, a16z and General Catalyst.

Applying to Atlas

Applying to form a company with Atlas takes less than 10 minutes. You'll choose your company structure, instantly confirm whether your company name is available and add up to four co-founders. You'll also decide how to split equity, reserve a pool of equity for future investors and employees, appoint officers and then e-sign all your documents. Any co-founders will receive emails inviting them to e-sign their documents, too.

Accepting payments and banking before your EIN arrives

After forming your company, Atlas files for your EIN. Founders with a US Social Security number, address and mobile phone number are eligible for IRS expedited processing, while others will receive standard processing, which can take a little longer. Additionally, Atlas enables pre-EIN payments and banking, so you can start accepting payments and making transactions before your EIN arrives.

Cashless founder stock purchase

Founders can purchase initial shares using their intellectual property (e.g. copyrights or patents) instead of cash, with proof of purchase stored in your Atlas Dashboard. Your IP must be valued at $100 or less to use this feature; if you own IP above that value, consult a lawyer before proceeding.

Automatic 83(b) tax election filing

Founders can file an 83(b) tax election to reduce personal Income taxes. Atlas will file it for youwhether you are a US or non-US founderwith USPS Certified Mail and tracking. You'll receive a signed 83(b) election and proof of filing directly in your Stripe Dashboard.

World-class company legal documents

Atlas provides all the legal documents you need to start running your company. Atlas C corp documents are built in collaboration with Cooley, one of the world's leading venture capital law firms. These documents are designed to help you fundraise immediately and ensure your company is legally protected, covering aspects like ownership structure, equity distribution and tax compliance.

A free year of Stripe Payments, plus $50K in partner perks and $2,500 in Stripe credits

Atlas collaborates with top-tier partners to give founders exclusive discounts and credits. These include discounts on essential tools for engineering, tax, finance, compliance, and operations from industry leaders like AWS, Carta, and Perplexity. We also provide you with your required Delaware registered agent for free in your first year. Plus, as an Atlas user, you'll get $2,500 in Stripe product credits for use in their first year after incorporation.

Learn more about how Atlas can help you set up your new business quickly and easily and get started today.

You can also check out our quick step-by-step Reddit guide on starting your first company with Stripe Atlas.