What Is a Single-Member LLC?

If you want to start a business on your own, without involving partners, there are several ways to do it: 

• Form a sole proprietorship;
• Register a single-member limited liability company.

Due to the fact that there are no forms, no fees to operate as a sole proprietorship, this way is one of the most rapid and cheapest. However, if you are looking to protect your personal assets or want to have a flexible business structure, an SMLLC is a better option.

Let’s take a closer look at the advantages and disadvantages of a single-member limited liability company, and describe the process of formation one.

What Is a Single-Member LLC?

When starting a business, many entrepreneurs choose a sole proprietorship for its ease of operation and low cost. In this case, there is no formal process to register it, so you can start making money right away, without wasting time on paperwork. In addition, the absence of mandatory fees for creating or maintaining a stable activity of the company allows you to save significantly.

However, the informal status has a number of disadvantages.

A single-member LLC’s registration involves some requirements, but the advantages it offers compensate for them. 

One of the advantages of forming a single-member LLC is limited liability protection, which is not possible, if you choose a sole proprietorship. Because an LLC conducts business as a separate entity, and it is independently liable for all the obligations incurred. This means that in the case of a debt or a lawsuit against the company, creditors will not be able to claim personal assets of the owner. Their claims will be limited to business assets LLC.

As for the management structure, there is no difference between a single-member LLC and a multi-member LLC in this aspect. At will, the business owner can choose one of two options:

• Be in charge of all the processes;
• Entrust the day-to-day activities of the company to a manager.

Why Should I Form a Single-Member LLC?

Of course, it may not be beneficial to every business owner to form an SMLLC. This solution requires some preparation and consideration of the specifics of your company. To make this task easier, pay attention to the following points:

• Does your business create personal risk?
• Are you ready to provide a separation of corporate and personal assets in order to keep the corporate veil valid?

Compared to a sole proprietorship, forming an SMLLC provides advantages like:

• Being a legitimate company, your business will have more credibility in the eyes of potential customers and business partners;
  
• The ability to secure a unique business name: when you register a single-member LLC, you will receive exclusive rights to the name. This guarantees that other companies operating in the state will be denied the attempt to use it;
  
• As a separate legal business entity, an LLC provides a high level of protection for the personal assets of its owners;
  
• Your business gains a tremendous amount of confidence in the eyes of banks and investors, that makes it easier to get financing;

• Flexible taxation: an LLC, that acts as a legal business, can choose how it will be taxed;

A single-member LLC can select any type of taxation:

• LLC is taxed as disregarded entities by default. This means that it is not necessary to pay business income taxes. All profits and losses of the company are reported on the personal tax return of the owner. You must just fill out Schedule C (Form 1040);
  
•  C-corporation: an LLC is subject to a flat corporate income tax. It may be provided at the following levels:

• Federal;
• State;
• Local.

The owner also files a separate tax return.

• S-corporation: in which case the IRS will treat the LLC as a pass-through tax unit. The income tax is paid only by the owner, and you don’t need to pay self-employment tax.

How Do I Form a Single-Member LLC?

The ease of starting a sole proprietorship is one of the main advantages. The process of registering a single-member LLC is also quite simple and understandable. Even first-time entrepreneurs can handle it.

When forming an SMLLC, the key step is to file your Articles of Organization, which usually includes the following important details of the company, such as:

• Сompany’s name and physical address;
• The name(s) of LLC owner/member(s);
• The name and address of the registered agent;
• The identity of the LLC organizer, etc.

The Articles of Organization ( in some states it is the Certificate of Organization or Certificate of Formation) contains all the basic information about a company. A sample of a standard Articles of Organization form is usually available on the state’s Secretary of State website or on the website of another state agency that specializes in business registration.

After providing all the necessary information, you can file your documents by mail, in person, or online by paying the registration fee.

How Much Does It Cost to Form a Single-Member LLC?

To form a single-member LLC you must pay a filing fee for the Articles of Organization, which varies from state to state. In some of them, such as Kentucky, the state’s filing fee is less than $50. In others, such as Tennessee, business expenses for registration may be up to several hundred dollars. 

As a rule, you can find the exact state’s filing fee on the Secretary of State’s website. Visit it before submitting company documents. Check out all the requirements, the list of documents to be submitted, and the amount of fees. This will allow you to avoid possible surprises during registration and calculate a budget to form a single-member LLC.

Can I Hire Someone to Form My Single-Member LLC?

If you plan to form your business or expand an existing one, you will have many plans that will be difficult to realize on your own. In this case, to save time and effort, many entrepreneurs hire professionals to form their single-member LLCs. 

It can be:

• A lawyer;
• A professional online company.

The indisputable advantage of hiring a business attorney to support the LLC formation process is the high quality of the documents. You will get a detailed, individualized and reliable document. This will be a good base for the stable work of the company.

However, unrivaled legal expertise requires a fair fee. Attorney’s fees sometimes reach several hundred and sometimes thousands of dollars, which makes this option too expensive for most startups.

Fortunately, hire an online LLC formation service allows you to professionally form your LLC for a very reasonable price that even small businesses can afford.

There are many companies offering a variety of business formation and maintenance services on the Internet. Take a look at our list of favorite single-member LLC service that can offer the best value for money in this industry.

ZenBusiness

Their starter package is only $39. It includes all the baseline features, as well as the opportunity to use the services of a registered agent for free for 1 year.

A great option for those who want to start an LLC quickly and without overpaying.

IncFile 

This is definitely the cheapest of the LLC formation services, because the basic package costs $0. 

Another big plus of this online company is that their list for LLC formation services includes 1 year of registered agent service for free.

Northwest Registered Agent

Starting an LLC with this company will cost $225. 

The business startup package from Northwest includes a registered agent service for 1 year. In addition, you get local scanning of all documents. 

Unlike their competitors, who only scan legal letters and state notices, Northwest Registered Agent scans all other official correspondence for your company.

In addition, customer support from Northwest Registered Agent is considered the best in the industry because of their professionalism and individual approach to each client.

Conclusion

Nowadays an LLC is one of the most popular business structures in America. If you are planning to form your own company and choosing between a sole proprietorship and a single-member LLC, we advise you to choose the latter. 

Although the process of its creation requires some financial and time costs, the advantages that a single-member LLC offers to its founder have obvious benefits over a sole proprietorship. For example, having official status will make the business more credible, and personal asset protection will give you reliability and stability. In the event of a lawsuit, it will ensure that your home, bank accounts, car and other assets remain intact.

When planning your future LLC, remember that you can always entrust some of your business processes to professionals. Just choose one of the online companies that are experts in the industry, and they will take care of all the legal nuances.