How to Form a Single-Member LLC (SMLLC)
If you’re the sole owner of your business, you don’t have to operate as a sole proprietor. Solo entrepreneurs can minimize their potential liability and maximize their tax benefits by forming a single-member LLC (SMLLC).
If you’re the sole owner of your business, you don’t have to operate as a sole proprietor. Solo entrepreneurs can minimize their potential liability and maximize their tax benefits by forming a single-member LLC (SMLLC).
What Is a Single-Member LLC?
LLC is an abbreviation for limited liability company. The owners of an LLC are called “members,” so a single-member LLC is a limited liability company that only has one owner.
The “limited liability” part of your single-member LLC’s name means that you aren’t personally responsible for the LLC’s debts and obligations (unless you’ve signed a personal guarantee). If the LLC can’t pay its bills and gets sued, only the LLC’s money and assets can be used to satisfy the debt—your home, car and personal bank account aren’t at risk. In contrast, if you’re a sole proprietor, you and the business are legally the same, and any business debts and obligations are also yours personally.
Reasons to Form a SMLLC
Limited liability is the main reason solo business owners form an LLC. But establishing an LLC can also have other advantages:
Single-member LLC taxes are flexible. A single-member LLC is ordinarily taxed like a sole proprietorship, but it can choose to be taxed as a corporation if that is more advantageous. An accountant can advise you on the best tax status for your LLC.
Many small business owners prefer LLCs over corporations because they have a more flexible management structure and typically have fewer recordkeeping and reporting requirements.
Forming an LLC helps protect your business name from use by competitors. States do not allow two business entities to be formed with the same name, and LLC formation creates a public record that you’re using the name.
Outsiders may view your business as more legitimate and credible if it’s an LLC rather than a sole proprietorship.
How to Form a Single-Member Limited Liability Company
Here are the steps to form a single-member limited liability company:
1. Find out if the name you want is available. Before forming an LLC, conduct a name search to make sure the name you want to use for your LLC is available in your state. Most states allow you to search business names online. If you are not ready to form your LLC right away, almost all states allow you to reserve a name for a limited period of time.
2. Choose a registered agent for your LLC. A registered agent is a person or business entity that will accept lawsuits and other legal documents on behalf of your LLC. In most states, a registered agent can be anyone—including you, although there are disadvantages—who is over 18, has a physical address in the state, and is ordinarily available at that address during business hours.
Read more here: https://www.legalzoom.com/articles/how-to-form-a-single-member-llc-smllc