How to Operate a Business As a Single-Member Limited Liability Company

By Bryan Driscoll, J.D.

How to Operate a Business As a Single-Member Limited Liability Company

By Bryan Driscoll, J.D.

Small businesses are the oil in America's engine that keep this country running. Small business owners have several options for operating structure, including creating a sole proprietorship, incorporating, or even operating as a limited liability company (LLC).

What is an LLC?

An LLC is a type of business structure that can be useful for small business owners. Unlike corporations, an LLC has a simpler creation and retention process.

The steps to create an LLC can be quite complex, particularly depending on what state you are creating your business in, as well as the type of industry you intend on operating in.

Single Member LLC

Single member LLCs are no different than any other LLC, except that there is only one owner, also referred to as a member. They can be good for those small business owners who want to own and operate a company alone. All states allow the formation of this type of LLC. You can certainly create an LLC on your own, however, it is highly recommended that you use a skilled business attorney or our online service.

File articles of organization

Your state's Secretary of State (SOS) requires that you file the articles of organization. This document will identify your name, your business name, and company address. Keep in mind that, when choosing a business name, certain rules apply. Be sure to visit the state's SOS website to learn more about what rules and limitations apply, i.e. prohibited terms, etc.

Additionally, you will have to pay a filing fee for this service, which varies by state. This is why it's important to speak with a legal advisor on your state's filing fees and formal requirements.

Register

There are several registration steps you must take after you've filed your articles of organization. You will need an employer identification number, or EIN. The IRS requires EIN's for all businesses. You can apply for one in a matter of minutes directly on the IRS website.

You will also need to register your LLC with your state tax collector. Some states collect income tax from LLCs, which is why it's important to check your state's local LLC laws.

You might also need business licenses. Depending on the type of business your LLC conducts, you might need to collect sales tax if you are selling products, or alternatively, you might be subject to additional regulations if you operate in the food industry.

Report income and tax

This is a requirement for all LLCs. You must pay tax on the income received by the business. Furthermore, as a single member LLC, you must also pay self-employment tax of 15.30% that covers social security and Medicare.

When it comes to business taxation, you have the choice of being taxed as a corporation or a disregarded entity. With regard to the latter, all of the income from the LLC will be reported on your own personal income tax return.

There are many decisions you must make when creating your single member LLC. From your business name to how you choose to be taxed, these decisions can be overwhelming. A single member LLC is a great option for your small business. But make sure it is set up correctly by speaking with an experienced legal adviser.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.