1. Step One: Choose a Management Structure
2. Step Two: Choose a Title
3. Step Three: Create an Operating Agreement
4. What Is a Single-Member Limited Liability Company?
5. How to Form a Single-Member LLC
6. The SMLLC as a Disregarded Entity

One-owner LLCs are common with smaller limited liability companies, while larger companies might have more members. The advantage of LLCs is they have additional liability protection. The main advantage they have over corporations and other types of entities is an extra layer of protection that prevents creditors from going after the members' personal assets in the LLC.

If a member's membership was suddenly seized in the LLC, the other partners would have to deal with a new partner. This could be the person who was owed money, the bank, or the federal government. Creditors can't take the partner's interests in the LLC but can get a charging order to try to get what percentage of profits that were allocated to them.

Step One: Choose a Management Structure

There are two types of management for limited liability companies — manager-managed and member-managed. This is true no matter if the LLC is single member or multimember. If the management structure isn't specified in the operating agreement or articles of organization, the state will decide that the LLC is member-managed by default. In LLCs that are member-managed, the owner is considered the manager.

In LLCs that are manager-managed, a manager role will be created that's different from the ownership. The manager is in charge of everyday operations for the company, such as writing checks, hiring or firing employees, and entering into business contracts. The owners are in charge of higher-level decisions, such as getting another business or acquiring a loan. Many times single-member LLCs decide to be member-managed. If the LLC has ownership of retail stores, it would be wise to hire a manager in charge of managing employees, dealing with the inventory, and running the store.

Step Two: Choose a Title

In a single-member LLC, the sole member has the freedom to decide which title to use. There does not need to be specific titles like there are in a corporation. The member can call himself one of the following: 

  • Marketing director 
  • Managing partner 
  • Chief of technology 
  • Principal 
  • President 
  • Founding director

Step Three: Create an Operating Agreement

It's not necessary to have an operating agreement when setting up a limited liability company. If there is just one person in the company, that person might not see the point. However, it makes all operations in the future much easier. Details can be listed, such as who is in charge of making decisions, how the funding will happen for the LLC, and what happens to the business if the owner becomes incapacitated. Another benefit of making an operating agreement is that it shows separation between the business and personal affairs. This helps protect the personal assets of the owner.

What Is a Single-Member Limited Liability Company?

A limited liability company that has a sole owner is called a single-member limited liability company (also known as an SMLLC). This business entity is registered in the same state where the company conducts business. The phrase "single-member" means that there is only one owner in the LLC, as members are also known as owners. Single-member LLCs have the same pros and cons as any limited liability company.

How to Form a Single-Member LLC

In order to form a limited liability company that's single-member, the person needs to contact the secretary of state's office in the state that the company is doing business in. This office will provide the necessary information on how to proceed with forming the LLC. This includes paying a filing fee and filing a certificate of organization or articles of organization. After the state business registration is filed, an operating agreement should also be prepared so it will be clear how the business will be run.

The SMLLC as a Disregarded Entity

The SMLLC is the entity that's most common, and the sole member will file a Schedule C with an individual tax return. This prevents the member from dealing with double taxation, which happens in a C corporation. Tax filings are also simplified this way. Money and time will be saved when the income tax returns are being prepared since the company doesn't need to file a return. Single-member LLCs are regarded as disregarded entities by the Internal Revenue Service.

If you need help with forming a one-owner LLC, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.