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Single Member LLC Definition

Single Member LLC Definition

A Single Member LLC definition is a limited liability company with one member. It’s a type of entity that has caught on across the United States. It was created to satisfy emerging needs from the rapidly changing business world. One example of this is the owner/member requirements of limited liability companies. The owners are often not required to be individuals, citizens, or a specific type of business. This gives more flexibility to single member limited liability companies as well as conventional limited liability companies.

One LLC variable that varies from state to state is whether a husband and a wife can own a single member LLC. Some states allow this, while others prohibit it. As you can see, many questions and possibilities arise when forming this type of entity. If you are unsure, then seek professional advice to make sure that you are fully protected and acting within the law.

Why File For a Single Member LLC

LLCs have been very widespread since their invention. There are many different advantages of having an limited liability company. One of the broad advantages is the flexibility of taxes. Determine whether you want your LLC profit to flow-through to your personal income or whether it will be taxed as a corporation. The limited liability that this structure offers its members is another large advantage. LLCs’ liabilities are separate from the members as long as the corporate veil stays intact. One more significant benefit of limited liability companies is the ease of formation and lack of upkeep. LLCs have less stringent requirements than corporations and are faster, cheaper entities to form.


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Things to Consider First

If you’ve decided that an LLC or single member LLC is right for your business, then consider the following questions:

  • Will you be reinvesting a majority of profits into the business? If so, consider opting to be taxed as a corporation.
  • Are you going to do business internationally?
  • Is the single member LLC for you?
  • Are there multiple owners? Is your operating agreement thorough enough?
  • What are your state’s laws regarding LLCs?

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See also:
Corporate Veil

Originally posted by Jim Wilkinson on June 6, 2014. 

Single Member LLC definition

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Single Member LLC

Single Member LLC Definition

Single Member Limited Liability Companies are LLC’s wholly owned by one member. The Internal Revenue Service (IRS) treats these companies as “a disregarded entity” in tax terms. The entity is disregarded as separate from the member for income tax purposes. In other words, the business’s income flows through to the owner’s personal income tax form; however, this does not mean that the single member LLC avoids other taxes.

As a single member LLC, you have to option to act as a corporation. This changes the tax implications for the business. Taking this option into consideration is important when filing the business. The member should also consider the tax implications of having all income taxed at a personal income tax rate versus a corporation tax rate. It is best to ask a tax professional before filing.

Furthermore, it takes careful consideration about the type of company and whether it will require significant reinvestment of profits. A single member LLC can benefit from being taxed as a corporation if it plans to reinvest large amounts of its profit. This prevents all the profits from being taxed at a personal income tax rate just to be reinvested into the company.

Sole Proprietorship vs LLC

If the IRS taxes a single member LLCs like a sole proprietorship, then what makes them different than a sole proprietorship? Sole proprietorships lack limited liability protection. Any liabilities taken on by the business puts the owners at personal risk. For example, imagine a local restaurant is a sole proprietorship. If someone is injured on the restaurant’s property, then they can hold the owners of the restaurant personally responsible. Insurance can help protect the owners, but sole proprietorships lack the inherit protection that limited liability companies have; however, if a LLC breaks the corporate veil, then its owners are subject to liabilities personally as if it was a partnership or sole proprietorship.

Limited liability companies offer the members more protection than proprietorships or partnerships. They are a mix between partnerships and corporations with several benefits from both. It is a recent type of entity. As a result, it has become one of the most popular. Furthermore, the formation of limited liability companies in states without an income tax is very popular. In the following states, single member LLC members avoid paying a state income tax on top of the federal income tax.

  • Alaska
  • Florida
  • Nevada
  • New Hampshire
  • South Dakota
  • Texas
  • Tennessee
  • Washington
  • Wyoming

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Single Member LLC

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Single Member LLC

See Also:
S Corporation vs C Corporation
Limited Liability Company (LLC)

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