How To Form A Single Member LLC

Do you know the difference between a limited liability company (LLC) and a single member LLC? While both may sound like they have similar duties, these two entities are quite different from one another.

LLCs And Single Member LLCs: Defining The Difference

The key difference between a limited liability company and a single member LLC is in the entity’s name.

Limited Liability Companies (LLCs)

Limited liability companies were initially created to be a replacement for standard partnerships. This entity provides its members with liability protection. This ensures a separation between personal and professional assets. The assets and debts of an LLC are its own, as are the assets and debts of each member. If an unforeseen, negative circumstance should impact the business, it would not affect the personal belongings of the LLC’s members. Their assets would be safe.

Do LLCs differ from single member LLCs in any other way besides having multiple members? LLCs are also treated as partnerships on a federal level. An LLC may choose to be taxed as another entity that is not a partnership, but must file the appropriate forms with the IRS to make this change.

Single Member LLCs

A single member LLC lives up to its name. Only one member may run the business. If you’d like to add additional members, you may opt for a member managed LLC or manager managed LLC. (More about both of these formations and what they do momentarily.)

Much like LLCs, single member LLC formations are recognized at the state level by every state in the United States. You may incorporate as a single member LLC in any state you wish to do business. However, unlike an LLC, a single member LLC is not considered to be a partnership.

What does this mean for entrepreneurs that choose to incorporate as a single member LLC? We’ll tackle this area in more detail in a moment. For now, a single member LLC must be treated as its own separate, legal entity. This is true of running the business itself and how a single member LLC will report on its taxes.

Member Managed LLCs And Manager Managed LLCs

Want to add members, or managers, on to an LLC? Consider these two business formations in lieu of a single member LLC.

• Member Managed LLC: Every member in a member managed LLC is treated as an equal. All members share the same amount of responsibility in the LLC’s day-to-day operations. Due to the equality that members have, there isn’t a separate level of management to run the business. This formation is ideal for small businesses that may have limited resources or owners all equally invested in running the company.
• Manager Managed LLC: A board of managers oversees the direction and operation of a manager managed LLC. This board may be similarly compared to a board of directors in a corporation. These individuals exercise more control over the business than the members. A manager managed LLC is often preferred by members that are not comfortable running the LLC on their own, or run a large LLC that makes it difficult for all of the members to equally share management responsibilities.

Would you like to file as a member managed LLC or manager managed LLC? Specify which management structure you’d like to form on your LLC’s organizational forms. (Pro tip: there’s usually a box you can check off that indicates the LLC structure you’d like for your business!) Then, pay the filing fee and submit the paperwork.

Still want to form a single member LLC? Here’s what you need to know about the process.

5 Steps to Form a Single-Member LLC

Forming a single member LLC is not too different from forming an LLC. Generally, you’ll file an application, along with your Articles of Organization, with the state and pay a filing fee. However, there are a few additional details to keep in mind during the filing process.

1. Choose Your LLC Name: Make sure the name is unique in your state, follows naming rules, and includes the required LLC designator.
2. Select a Registered Agent: Assign a person or service with a physical address in the state who can receive important mail and notices on your behalf.
3. File Articles of Organization: Submit the required formation paperwork to the state filing office to officially create the single-member LLC.
4. Create an Operating Agreement: Document how the business will be owned and managed, even if there is only one member.
5. Get an EIN From the IRS: Secure an Employer Identification Number to open a business bank account, file taxes, and handle other financial tasks.

Benefits of Forming a Single Member LLC

A single member LLC gives business owners a straightforward way to separate personal and business responsibilities. The structure creates liability protection, meaning personal assets are generally shielded from business debts or claims. Taxes are also simple because the IRS allows a single member LLC to be treated as a disregarded entity, so profit and loss flow through to the owner’s personal tax return. This setup works well for freelancers and independent business owners who want flexibility while still gaining credibility with customers, vendors, and banks.

Which Professions Can’t Form a Single-Member LLC?

A single member LLC is a popular option, but not every profession is allowed to operate under this structure. In some states, licensed professionals such as doctors, lawyers, accountants, architects, and real estate brokers may be required to form a Professional LLC (PLLC) instead. Rules vary depending on state licensing boards and regulations, so it’s important to confirm the correct business structure before filing. Checking requirements early helps ensure the business remains compliant from the start.

How to Manage and Operate Your Single-Member LLC

Once a single member LLC is formed, recordkeeping and compliance help the business maintain its liability protection. Opening a separate business bank account prevents personal and business finances from mixing. Creating an operating agreement clarifies management decisions and responsibilities even with one owner. Filing annual reports, paying required fees, and keeping accurate financial records help maintain good standing with the state. Staying organized from day one reduces risk and supports long-term success.

Frequently Asked Questions

Do I need an Operating Agreement for a single member LLC?

Yes. Most states don’t require it, but having one creates a clear structure for how the LLC is run, supports liability protection, and can help when opening business bank accounts or working with partners and lenders.

What happens if I add another member to my single member LLC?

The business simply becomes a multi-member LLC. It may require updating the operating agreement, tax classification, and state filings to reflect the new ownership structure.

Still Have Questions About Single Member LLCs?

If you’re not sure which LLC formation is the best fit for you and your business, consider consulting a legal professional for additional advice. For questions related to single member LLC structures — as well as member managed and manager managed entities — contact MyCorporation’s skilled professionals at 877-692-6772.