Can One Person Own an LLC and How It Works

Key Takeaways

• Yes, one person can own an LLC — this structure is called a single-member LLC (SMLLC) and is recognized in all 50 states and D.C.
• A single-member LLC provides limited liability protection, separating personal and business assets, similar to a corporation.
• For tax purposes, the IRS treats single-member LLCs as “disregarded entities,” meaning profits and losses pass through to the owner’s personal tax return unless the owner elects corporate taxation.
• Forming a single-member LLC requires filing Articles of Organization, designating a registered agent, and maintaining an operating agreement, even if there is only one owner.
• Proper recordkeeping, business bank accounts, and compliance with IRS and state rules help maintain liability protection and avoid “piercing the corporate veil.”
• Single-member LLCs differ from sole proprietorships mainly through their liability protection and optional tax flexibility.

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.

Understanding Single-Member vs. Multi-Member LLCs

LLCs can be structured with either one owner (single-member) or multiple owners (multi-member). Both provide limited liability protection, but they differ in how they’re taxed and managed.

• Single-member LLCs (SMLLCs) are owned and operated by one individual or entity. The IRS treats them as disregarded entities, meaning income and expenses are reported on the owner’s personal tax return, similar to a sole proprietorship.
• Multi-member LLCs, on the other hand, are taxed as partnerships by default and must file Form 1065, distributing profits and losses through Schedule K-1 forms to each member.

Single-member LLCs offer the simplicity of sole proprietorships combined with the liability protection of corporations. This makes them particularly appealing to freelancers, consultants, and small business owners who want personal asset protection without corporate complexity

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. 

IRS Classification and Tax Treatment of a Single-Member LLC

According to the IRS, a single-member LLC is a separate legal entity under state law but not recognized as a separate entity for federal tax purposes unless it elects otherwise. By default, the IRS treats it as a disregarded entity, meaning:

• Income reporting: The LLC’s income and expenses flow directly to the owner’s Form 1040, usually through Schedule C (Profit or Loss from Business).
• Employment taxes: Single-member LLCs that hire employees must obtain an Employer Identification Number (EIN) and pay employment and excise taxes under their LLC name.
• Corporate election: Owners can file Form 8832 to be taxed as a corporation or Form 2553 to elect S corporation status.

It’s important to note that while federal taxes treat the LLC as disregarded, states may impose separate entity-level taxes or fees (for example, California’s annual $800 franchise tax).

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.

Legal Steps and Compliance Requirements

Forming a single-member LLC involves several steps that ensure compliance and legal protection:

1. Choose a unique business name that complies with your state’s naming rules and includes “LLC” or “Limited Liability Company.”
2. File Articles of Organization (or Certificate of Formation) with your state’s Secretary of State office and pay the applicable filing fee.
3. Designate a registered agent who can receive legal notices and government correspondence on behalf of your LLC.
4. Create an Operating Agreement. While not always required by law, this document outlines how your LLC will operate, how profits are distributed, and the procedure for dissolving or transferring ownership.
5. Apply for an EIN through the IRS if you hire employees or open a business bank account.
6. Comply with state licensing and tax requirements, such as business permits or annual reporting obligations.

Following these steps ensures your LLC remains in good standing and continues to protect your personal assets.

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.

Best Practices for Managing and Protecting a Single-Member LLC

To maintain limited liability and keep your single-member LLC compliant, it’s essential to separate personal and business activities:

• Keep separate bank accounts: Never mix personal and business funds to prevent “piercing the corporate veil.”
• Maintain detailed records: Document all business transactions, contracts, and financial statements.
• Use your LLC’s legal name on contracts, invoices, and other official documents.
• Renew business licenses and file required annual reports to remain compliant with state regulations.
• Consider professional help: Consult accountants or attorneys to optimize your tax treatment and ensure legal compliance.

Single-member LLCs offer flexibility, but their simplicity can lead to neglecting formalities. Consistent adherence to best practices preserves your liability protection and demonstrates that your business operates as a legitimate separate entity.

Single-Member LLC vs. Sole Proprietorship

Although both structures are owned by one person, they differ in several key areas:

Choosing between the two depends on your long-term goals. If liability protection and credibility are priorities, forming a single-member LLC is usually the better choice.

Frequently Asked Questions

1. Can one person own an LLC?

Yes. Every state allows one person to form and operate a single-member LLC, which provides liability protection and pass-through taxation.

2. Do single-member LLCs pay separate taxes?

By default, no. The IRS treats them as disregarded entities, meaning income is reported on the owner’s individual tax return. However, you can elect corporate taxation.

3. What are the advantages of a single-member LLC?

They combine personal asset protection with simplified taxation and flexible management—ideal for solo entrepreneurs.

4. Is an operating agreement required for a single-member LLC?

Not always, but it’s highly recommended to document your business structure, clarify ownership, and demonstrate separation between you and the LLC.

5. How does a single-member LLC differ from a sole proprietorship?

A single-member LLC offers liability protection and legal recognition as a separate entity, while a sole proprietorship does not.

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