To create a single-member LLC, file paperwork with the state where you plan to conduct business, then choose a name and file Articles of Organization. Additionally, execute a Single Member LLC Operating Agreement, file a Statement of Information, obtain an EIN from the IRS, and pay the required taxes and obligations.
A single-member LLC can provide personal liability protection. As a separate legal entity, its owner has no interest in the LLC’s property, meaning creditors cannot pursue the LLC’s assets to satisfy an individual owner’s debts. Despite the shield it offers, an LLC does not fully protect you from personal liability. Mistakes such as not adhering to corporate formalities or intermingling personal and business finances can lead to personal liability. It is crucial to operate your LLC independently from your personal dealings.
Decision Factors: Single vs. Multi-Member LLC
Deciding between a single and multi-member LLC involves consideration of taxes, ownership, management, asset protection, formation, and compliance requirements. It’s advisable to consult an attorney and accountant to weigh the pros and cons specific to your situation before starting a business.