Updated July 15, 2020:

What Is an LLC?

Can one person own an LLC? Yes, in the District of Columbia, as well as all 50 states, one person can form an LLC as a single-member LLC, though they may not have all the same protections as a multi-member LLC. A company can be structured as an LLC that has owners, which are referred to as company members. These owners will be able to avoid personal liability for debts acquired by the company if structured as a limited liability corporation. 

In addition to reduced liability, an LLC can provide for certain tax advantages and be originally conceived as an alternative to forming a corporation or a partnership. While LLCs that began in the 1970s originally required multiple members this is no longer the case. Since this structure was originally formed and designed to be a substitute for partnerships the IRS may require conditions set forth by partnerships such as the fact that a "partner" or second party be involved.

If utilizing a partner for the formation of your LLC, they are not required to participate in the management of the company and have the right to stay a silent partner. To do this, you will need to set up the organization of your LLC to be manager-managed and name yourself as the sole manager. This will not only keep all of the decision making power with yourself but also limit the partner's exposure to day-to-day business requirements and operations.

When choosing a partner, you can even choose a relative or child, and they will only need as little as 2 percent of the company to be considered a partner. It is important to remember that if you have a partner and file your LLC as member-managed, you will be giving your silent manager the decision making power that you enjoy, so this should be avoided if they are not to be involved in business operations.

What Is a Single-Member LLC?

A single-member LLC is simply a limited liability company with one member that also happens to be the owner of the business, as with any LLC, it will need to be registered as a business entity in the state where it does its business. In regards to the IRS, a single-member LLC is considered a "disregarded entity" when it comes to tax purposes and any profit and losses from the business will need to be reported on the business owner's personal 1040. They will be treated the same as a sole proprietorship.

Effective January 2009, the IRS began requiring single-member LLCs to have an Employer Identification Number, and they will now be responsible for paying excise taxes as well as report, collect, and pay employment taxes. Additionally, the IRS may still consider you a single-member LLC if your other member is your spouse.

If you are the only member of an LLC, you do have a more likely chance of being held personally liable for company obligations and debts, due to veil-piercing conditions. 

How to Form a Single-Member LLC

If you have decided to form your own LLC you will need to contact the business division of your state's department of state to find out which forms and filing fees will be required to establish your company. You will then need to create your Articles of Organization or Certificate of Organization and pay the required filing fee. Once you have completed your business registration is a good time to prepare your operating agreement, which will detail the ways your business will operate. When forming a single-member LLC, you will want to take into consideration the fact that:

  • An owner does not get a salary but takes out money for business and personal expenses.
  • The owner will make capital contributions from personal funds to provide the business with the operating capital it needs.

Things to Do When Operating a Single Member LLC

As soon as possible after your LLC has been filed you will need to fill out Form 8832 with the IRS called an Entity Classification Election, which will establish your tax treatment. If you are filing an IRS status that is considered a "disregarded entity" you will need to file your business information on a schedule C when filing 1040. To make your LLC function as easy as possible, you will want to:

  • Keep accurate records.
  • Keep meeting minutes when major company decisions are made.
  • Allow membership to vote on major business decisions.
  • Keep business banking and expenses completely separate from personal banking.
  • Include on behalf of your business when signing business-related documents.

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