Single-Member LLC Definition

A Single-Member LLC is a business structure in which a single individual or entity owns and operates a limited liability company, providing personal liability protection while simplifying management.

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A single-member LLC (or SMLLC) is a particular type of limited liability company. Specifically, as the name suggests, a single-member LLC has only one owner, referred to as a member. 

If you’re considering forming a single-member LLC but aren’t sure where to begin, we want to help. Use our guide below to learn more about single-member LLCs and see whether it’s the right legal entity type for your business. 

Single-Member LLC Definition: An Overview

There are many types of legal entity structures to choose from, one of which is the single-member LLC. But before setting up your business as a single-member LLC, there are a few important things you should know. 

Single-Member LLC Taxes

Take careful note of your tax obligations when forming your company. 

According to the IRS, unless a single-member LLC elects to be treated as a corporation, the LLC will be a “disregarded entity” for tax purposes. This means that the LLC’s income won’t be taxed at the business level. Instead, the business income will be reflected on the individual owner’s federal tax return.

Alternatively, if you choose to be taxed as a corporation, you will instead obtain a separate employer identification number (EIN). This number is like a personal social security number for your company, and it enables you to file taxes for the business separately from your own individual taxes. 

Single-Member LLC Advantages

There are many advantages of setting up your small business as a single-member LLC. For example, common advantages include: 

  • Tax advantages
  • Personal liability protection
  • Simplicity of formation
  • Relatively low start-up costs

For these and other reasons, many new business owners choose to set their entities up as single-member LLCs. 

Single-Member LLC Disadvantages

Of course, there are some disadvantages to be aware of as well. Some of these disadvantages include: 

  • Business naming restrictions
  • Ongoing filing requirements and fees
  • Other state-specific compliance requirements 

As with all things in life, it’s important to consider both the pros and cons before making your decision on what type of entity to form. 

Should I Form a Single-Member or Multi-Member LLC? 

The answer to this question will often depend on the particular needs and goals of your business. Forming a single-member LLC is often a simpler process than forming a multi-member LLC. And as the sole owner of a single-member LLC, you’ll have ultimate decision-making authority—as opposed to a multi-member LLC where decisions need to be made jointly with other members. 

Despite some of these single-member LLC benefits, forming one may not be right for all businesses. For example, if you have already committed to forming a business with one or more co-owners, a multi-member LLC may be the way to go. 

If you’re not sure which option is right for your business, speak with a local legal professional to discuss the available options in more detail.

Do all states recognize a Single-Member LLC?

As of the writing of this definition, all states and the District of Columbia allow the formation of an SMLLC or permit LLCs to have just one member.

Single-Member LLC Definition: Summary

Single-member LLCs (also referred to as sole member LLCs) can be a great legal entity structure if you’re looking to start a small business. However, while there are many advantages to forming a single-member LLC, there are also drawbacks to consider before making this important decision. A single-member LLC might be perfect for you, or it might not be the most advantageous choice for what you’re trying to accomplish through your company. 

If you’re not sure whether to form a single or multi-member LLC, be sure to consult with a legal professional in your state.  

We Can Help

When you’re looking to start or grow a business, we’ll be here to help. From business entity formation to Worry-Free Compliance and everything in between, we have a variety of products and services to help your business succeed. 

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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Written by Team ZenBusiness

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