Can One Person Form an LLC?

By Jeff Franco J.D./M.A./M.B.A.

The authority to create a limited liability company lies with the government of each state and the District of Columbia. Most of these jurisdictions adopt the principles of the Revised Uniform Limited Liability Company Act, which allows for the creation of an LLC with only a single member. Creating and operating a business as an LLC requires you to adhere to the laws of your particular jurisdiction.

The authority to create a limited liability company lies with the government of each state and the District of Columbia. Most of these jurisdictions adopt the principles of the Revised Uniform Limited Liability Company Act, which allows for the creation of an LLC with only a single member. Creating and operating a business as an LLC requires you to adhere to the laws of your particular jurisdiction.

Formation

Most states require you to draft articles of organization as the initial step in the process of forming a legal LLC. Each jurisdiction designates a specific office, such as the secretary of state, that is charged with the creation of business entities. The articles must include the name of your business, its principal place of business and the name and address of the agent you authorize to accept legal service of process. There is no restriction on designating yourself as the agent. The official date of LLC formation occurs when the appropriate office files the articles. In the event information on the articles changes, you must make an amendment and deliver it to the state office.

Ready to start your LLC? Start an LLC Online Now

Personal Liability

Most jurisdictions provide limits on a member’s personal liability when conducting business activities of the LLC. However, as the sole member of the LLC, you may not receive the same level of personal asset protection as a multi-member LLC. Many state courts allow personal creditors to obtain a judgment from your interest in the LLC. As the sole member, your interest represents 100 percent of the assets of the business.

Dissolution

Once you create the LLC, it exists for an indefinite amount of time irrespective of the level of business activity. The laws governing your LLC will only force its dissolution if you use the LLC to conduct fraudulent or criminal activity. However, as the single member, you have the authority to dissolve the LLC and cease all business activity at any time for any reason. At the time of dissolution, you must pay any outstanding balances you have with creditors of the LLC. Once you satisfy all third-party obligations, you may liquidate the company with all remaining assets becoming your personal assets.

Taxation

The Internal Revenue Service automatically designates a new single-member LLC as a sole proprietorship solely for income tax purposes. This requires you to report all profits and losses that relate to the business activities on the Schedule C attachment to your personal income tax returns. Schedule C allows you to claim all business expenses that are otherwise not available on a personal tax return. You must combine the resulting income or loss with other personal income that does not relate to the LLC and pay the appropriate tax using individual income tax rates. As an alternative, the federal tax law allows you to elect corporate tax treatment by filing IRS Form 8832. However, taxing the LLC as a corporation imposes an additional level of tax. The LLC must report and pay tax on its earnings, and you must pay a second level of tax on any after-tax earning distributions you take.

Ready to start your LLC? Start an LLC Online Now
How Fast Can I Get an LLC?

References

Related articles

Can I Have More Than One LLC?

The authority to create a limited liability company rests exclusively with the local governments of the states and the District of Columbia. As a result of many jurisdictions adopting the principles of the Revised Uniform Limited Liability Company Act, the bodies of law governing LLCs have become relatively uniform. Most of these laws do not prohibit business owners from creating multiple LLCs or from acquiring numerous membership interests.

About LLC Businesses

Limited liability company business structures are available in every state. Although the laws governing LLCs are fairly uniform across all jurisdictions, there are slight variations, and you must adhere to the laws of the state in which you create the LLC. You can determine a state’s requirements by contacting its Department of State.

LLC Laws

The applicable laws governing LLCs depend on the jurisdiction that creates them. Most jurisdictions have similar requirements as a result of the widespread adoption of the Uniform Limited Liability Company Act. Although as an owner of an LLC, you are free to operate the business with minimal governmental intervention, you must still comply with the applicable laws when necessary.

LLCs, Corporations, Patents, Attorney Help

Related articles

LLC Business Filings

Forming and operating a business using the limited liability company business structure requires minimal document ...

Taxation of an LLC

The Internal Revenue Code (IRC) does not impose a separate body of tax law that is applicable to limited liability ...

Can You File an LLC With Personal Taxes?

The Internal Revenue Service has yet to create a tax return for LLCs. The income and loss that a LLC generates is ...

Requirements for an LLC

The state laws governing the creation, operation and dissolution of limited liability companies are fairly uniform in ...

Browse by category