Single Member LLC

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 3,979 reviews

Jump to Section

Need help with a Single Member LLC?

CREATE A FREE PROJECT POSTING
Post Project Now

What is a Single Member LLC?

A single-member LLC is a limited liability company that is owned and operated by only one person. The owner of an LLC is referred to as a “member” of the LLC. Single-member LLCs, often abbreviated to SMLLC is a great option for someone who wants the freedom of a sole proprietorship with the liability protection of an LLC.

State laws vary on the formation and rules that apply to SMLLCs. Some states require a written operating agreement if the sole member of the single-member LLC is also acting as the manager of the LLC.

Single-member LLCs offer the same liability protection as multi-member LLCs and corporations. They are taxed similarly to a multi-member LLC unless the member elects otherwise and is approved by the IRS.

Click here to find out how the IRS classifies single-member LLCs.

How Single Member LLCs Work

Formation- To form a single-member LLC, the owner must complete several steps.

  1. The owner must file Articles of Organization with the Department of State in which the company will be operating. Some states call these formation documents a Certificate of Organization . Each state will require a filing fee with these documents.
  2. Although they are not usually necessary, it is a good business practice to prepare an operating agreement for your SMLLC. Some states will require a written operating agreement so it is important to know your local laws or consult with an LLC lawyer about what is required. The operating agreement is similar to corporate bylaws in that it will outline how your business will run and operate.
  3. The last step that is required for SMLCC formation is to appoint a registered agent . The registered agent is in charge of receiving legal documents and correspondence on behalf of the company. The registered agent is required to have a physical registered address.

Here is an article about expected operating agreement costs .

Disregarded Entity- Unless the single-member LLC elects to be taxed as a corporation, the IRS will designate the SMLLC as a disregarded entity. This means that the business is basically ignored for federal and sometimes state income tax purposes.

Taxes will be collected through the member's personal income tax return and the SMLLC will only be responsible for paying employment taxes if there are employees and certain use taxes.

Taxes- A single-member LLC has the option to elect to be treated as a corporation by the IRS for tax purposes. To accomplish this, the member must file Form 2553 , Election by a Small Business Corporation, with the IRS.

If the SMLLC does not elect to be treated as a corporation, it will be considered a disregarded entity. In this case, all of the SMLLC’s activity like profit and losses will be reported on the member’s personal tax return. The member will use Form 1040 or 1040-SR Schedule C to report the SMLLC’s activity.

Similar to a sole proprietorship, the member of an SMLLC is considered self-employed, not an employee of the company so the SMLCC is subject to self-employment taxes.

Advantages- A single-member LLC offers several advantages to members that a sole proprietorship does not. Some of those advantages include:

  • An LLC is a legally separate entity from the owner. This provides the LLC member with asset protection and liability protection against debts and risks incurred by the company.
  • Having the designation of “LLC” gives your business credibility and makes it more appealing to customers
  • Once your LLC is registered with the state, your business name is protected and no other companies can use it.

Read this article for more information about how a single-member LLC works.

Meet some lawyers on our platform

Matthew S.

2 projects on CC
View Profile

Wendy C.

2 projects on CC
View Profile

Daniel R.

8 projects on CC
View Profile

Kelvin R.

10 projects on CC
View Profile

Single Member LLCs vs. Multi-Member LLCs

The most obvious difference between a single-member LLC and a multi-member LLC is that single-member LLCs only have one owner while a multi-member LLC has two or more owners. However, this isn’t the only difference. There are several aspects of running a business that must be considered when deciding between an SMLLC or an MMLLC.

  1. Ownership Structure- A SMLLC will only have one member while an MMLLC can have an unlimited number of members. Each ownership structure offers advantages and disadvantages. The member of an SMLLC has the freedom to run the business as they please without having to agree with other members. An MMLCC however can benefit from additional capital and more expertise from various members who can all bring something unique to the business.
  2. Management Structure- A single-member LLC is managed by the sole member. A multi-member LLC must choose if they will be member-managed in which all the members of the LLC participate in the management of the company or a manager-managed LLC in which a manager is appointed to run day-to-day operations.
  3. Liability Protection- Both SMLLCs and MMLLCs provide liability protection for the members of the LLC. In both business structures, the members are separate entities from the company so they benefit from asset protection. In some cases, however, owners can be held personally liable for certain business practices.
  4. Taxes- A SMLLC is treated as a sole proprietorship and an MMLLC is treated as a partnership (unless the company elects to be treated as a corporation). Both business structures are pass-through entities . All profits and losses will be reported on the owner's personal income taxes.
  5. Laws- Both business structures are subject to federal and state laws and are required to be compliant to continue operating legally. Generally, multi-member LLCs will have more complicated requirements.

ContractsCounsel Single Member LLC Image

Image via Pexels by ELEVATE

Are Single-Member LLCs similar to Sole Proprietorships?

Single-member LLCs are similar to sole proprietorships in that both of these business entities only have one owner. The main difference however is that in a sole proprietorship, the owner and the business are the same. In an SMLLC, the business is a separate legal entity from the owner.

Being a separate legal entity provides the owner of the SMLLC with liability protection that the owner of a sole proprietorship does not benefit from. If a lawsuit were to be filed against a company that is structured as a sole proprietorship, the owner could risk losing their personal assets like real estate, vehicles, and personal bank accounts.

If a lawsuit is filed against a single-member LLC, the owner only has to worry about losing what they have put into the business. In most cases, creditors cannot come after any LLC member’s personal assets.

Although SMLLCs benefit from liability protection, they are more complicated to establish and require more paperwork than a sole proprietorship. To establish an SMLLC, the owner must file articles of organization with the state and pay more expensive filing fees.

Both single-member LLCs and sole proprietorships are required to fulfill the following requirements:

  • Obtain an EIN to open a business bank account and hire employees
  • Apply for and obtain any necessary licenses and permits to operate the business
  • Withhold payroll taxes from employee wages

Another similarity is that both business structures are taxed as pass-through entities. This means that the profits and losses for the company pass through the business and on to the owner. The owner is required to file all business activity on their personal federal tax return.

Who Needs a Single Member LLC?

Single-member LLCs are great business structure options for entrepreneurs who require liability protection due to the type of business they operate. An SMLLC works best for the following types of companies:

  • Rental Properties- Entrepreneurs who are going to begin a rental property business will normally opt for an SMLLC due to the benefit of asset protection. LLCs offer owners flexibility to expand and grow all while protecting personal assets.
  • Multi-Entity Structure- Some business owners will set up a “parent” LLC that owns the other SMLLCs. This allows for a consolidated tax return and provides additional protection as your wealth increases.
  • A Start-up that may convert to a corporation- Because LLCs offer great flexibility to owners, it is easy to expand and grow the business. Once the company income reaches a certain level, owners can opt to restructure as an S Corporation.

Get Help Forming a Single Member LLC

Do you have questions about forming a single-member LLC and want to speak to an expert? Post a project today on ContractsCounsel and receive bids from LLC lawyers and corporate lawyers who specialize in business formation.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Single Member LLC Lawyers

David W. on ContractsCounsel
View David
5.0 (1)
Member Since:
September 27, 2021

David W.

Lawyer
Free Consultation
Get Free Proposal
Wisconsin
7 Yrs Experience
Licensed in WI
Marquette Law School

The Law Office of David Watson, LLC provides comprehensive and individualized estate-planning services for all stages and phases of life. I listen to your goals and priorities and offer a range of estate-planning services, including trusts, wills, living wills, durable powers of attorney, and other plans to meet your goals. And for convenience and transparency, many estate-planning services are provided at a flat rate.

Samuel R. on ContractsCounsel
View Samuel
5.0 (19)
Member Since:
October 2, 2021

Samuel R.

Attorney
Free Consultation
Get Free Proposal
Phoenix - Arizona
4 Yrs Experience
Licensed in AZ, PA, UT
Widener University Delaware Law School

My career interests are to practice Transactional Corporate Law, including Business Start Up, and Mergers and Acquisitions, as well as Real Estate Law, Estate Planning Law, and Intellectual Property Law. I am currently licensed in Arizona and Pennsylvania, after having moved to Phoenix in September 2019. I am currently General Counsel for a bioengineering company. I handle everything from their Mergers & Acquisitions, Private Placement Memorandums, and Articles of Amendment to Intellectual Property Assignments, to Employment Law and Beach of Contract settlements. I have 4 years experience handling commercial breach of contract cases working with Burton Neil & Associates, P.C. I have experience with Intellectual Property infringement after having worked for Ryley Carlock & Applewhite. I have also recently gained experience with Estate Planning law, drafting numerous Estate Planning documents for people such as Wills, Powers of Attorney, Healthcare Directives, and Trusts. I am looking to further gain legal experience in these fields of law as well as expand my legal experience assisting business start ups, mergers and acquisitions and also trademark registration and licensing.

Gregory B. on ContractsCounsel
View Gregory
5.0 (51)
Member Since:
October 18, 2021

Gregory B.

Attorney
Free Consultation
Get Free Proposal
San Diego, CA
4 Yrs Experience
Licensed in CA
University of San Diego

I love contracts - and especially technology-related contracts written in PLAIN ENGLISH! I've worked extensively with intellectual property contracts, and specifically with IT contracts (SaaS, Master Subscriptions Agreements, Terms of Service, Privacy Policies, License Agreements, etc.), and I have built my own technology solutions that help to quickly and thoroughly draft, review and customize complex contracts.

Jordan M. on ContractsCounsel
View Jordan
5.0 (2)
Member Since:
October 13, 2021

Jordan M.

Partner
Free Consultation
Get Free Proposal
Houston, TX
4 Yrs Experience
Licensed in TX
University of Houston Law Center

I am a software developer turned lawyer with 7+ years of experience drafting, reviewing, and negotiating SaaS agreements, as well as other technology agreements. I am a partner at Freeman Lovell PLLC, where I lead commercial contracts practice group. I work with startups, growing companies, and the Fortune 500 to make sure your legal go-to-market strategy works for you.

Atilla B. on ContractsCounsel
View Atilla
Member Since:
October 4, 2021

Atilla B.

Counsel
Free Consultation
Get Free Proposal
Denver, CO
4 Yrs Experience
Licensed in CO, DC
American University - Washington College of Law

Atilla Z. Baksay is a Colorado-based attorney practicing transactional and corporate law as well as securities regulation. Atilla represents clients in the negotiation and drafting of transactional (e.g. master service, purchase and sale, license, IP, and SaaS agreements) and corporate (e.g. restricted stock transfers, stock options plans, convertible notes/SAFE/SAFT agreements, bylaws/operating agreements, loan agreements, personal guarantees, and security agreements) contracts, in-house documents (e.g. employment policies, separation agreements, employment/independent contractor/consultant agreements, NDAs, brokerage relationship policies, and office policy memoranda), and digital policies (e.g. terms of service, privacy policies, CCPA notices, and GDPR notices). Atilla also reviews, and issues legal opinions concerning, the security status of digital currencies and assets. Following law school, Atilla practiced international trade law at the Executive Office of the President, Office of the United States Trade Representative, where his practice spanned economic sanctions enacted against goods originating in the People’s Republic of China valued at $500 billion. Afterwards, Atilla joined a Colorado law firm practicing civil litigation, where the majority of his practice comprised of construction defect suits. Today, Atilla's practice spans all corporate matters for clients in Colorado and the District of Columbia.

Clara D. on ContractsCounsel
View Clara
Member Since:
October 8, 2021

Clara D.

Principal
Free Consultation
Get Free Proposal
Illinois
20 Yrs Experience
Licensed in IL
University of Chicago

After graduating from The University of Chicago Law School in 2002, Clara spent eight years in private practice representing clients in complex commercial real estate, merger and acquisition, branding, and other transactional matters. Clara then worked as in-house counsel to a large financial services company, handling intellectual property, vendor contracts, technology, privacy, cybersecurity, licensing, marketing, and otherwise supporting general operations. She opened her own practice in September of 2017 and represents hedge funds, financial services companies, and technology companies in a range of transactional matters.

Grant P. on ContractsCounsel
View Grant
Member Since:
October 12, 2021

Grant P.

Founder
Free Consultation
Get Free Proposal
New York
20 Yrs Experience
Licensed in FL, NJ, NY
Brooklyn

Founder and owner of Grant Phillips Law.. Practicing and licensed in NY, NJ & Fl with focus on small businesses across the country that are stuck in predatory commercial loans. The firm specializes in representing business owners with Merchant Cash Advances or Factoring Arrangments they can no longer afford. The firms clients include restaurants, truckers, contractors, for profit schools, doctors and corner supermarkets to name a few. GRANT PHILLIPS LAW, PLLC. is at the cutting edge of bringing affordable and expert legal representation on behalf of Merchants stuck with predatory loans or other financial instruments that drain the companies revenues. Grant Phillips Law will defend small businesses with Merchant Cash Advances they can no longer afford. Whether you have been sued, a UCC lien filed against your receivables or your bank account is levied or frozen, we have your back. See more at www.grantphillipslaw.com

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call