A limited liability company (LLC) offers liability protection by separating the business from the owner. An LLC with only one owner is called a Single-member LLC (SMLLC). For income tax purposes, an SMLLC is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and affirmatively elects to be treated as a corporation.
The purpose of forming an LLC is to protect the personal liability of the owners by separating personal assets from that of the business. All 50 states allow for Single-Member LLCs and this is the most popular type of LLC formed in the United States.
A sole proprietorship is a business owned by only one person. The biggest disadvantage of a sole proprietorship is the potential exposure to liability. In a sole proprietorship, the owner is personally liable for any debts or obligations of the business.
An LLC may be owned by one person or many. Owners of a multi-member LLC can manage themselves as a group or establish a single manager to govern. These two structures are called "member-managed" and "manager-managed," respectively.
Limited liability companies (LLCs) can also choose to be treated as a corporation by the IRS, whether they have one or multiple owners.
One person can form an S corporation, while in a few states at least two people are required to form an LLC. Existence is perpetual for S corporations. Conversely, LLCs typically have limited life spans.