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Staying Single: The One-Member LLC

“I like being single. I am always there when I need me.” – Art Leo

One question I’m asked by new entrepreneurs is whether one person can be his or her own company. The short answer is: Yes.  

We are not talking freelancing, here. There are reasons people will want to go the route of creating either a corporation or limited liability company (LLC) where they perform all the roles from janitor up to CEO.  For this article, we’ll discuss why an LLC is an optimal choice.

Unlimited Potential

When you go this route, it forces the professional and the individual to be completely separate — for better or worse. People create single-member LLCs for various reasons:

  1. You can get creative with your company name. A marketing pro named Bob Jones might want to be known as the CEO of “Jonesing For Marketing,” and not just be Bob Jones, marketing freelancer.
  2. In the same vein, Bob Jones can now say he owns his own company — even though he’s its sole employee. It’s up to him if he divulges that information to clients.  
  3. Operating as an LLC grants liability protection. While “Jonesing” can still be sued for things like breach of contract or other contractual issues, only the LLC can be held accountable so long as you “light the lights, and follow the formaiities,” and Mr. Jones’ personal assets will be safe. However, if he were to do something that physically harms someone else while operating the company, Mr. Jones may not have that protection.  

The Tax Question

What’s nice about the single-member LLC is that is can be taxed the way you want it taxed.  You want to be a corporation, you can be a corporation.  You want to have the tax flow through to your personal return, it’s taxed the same as if you were a sole proprietor and you’d pay taxes on business profits on your individual return.

Should you choose to add partners, the scenario changes and you cannot file the LLC’s revenues on your individual tax return.   

Some Additional Notes

It’s very important to keep your personal and professional lives separate. Use different credit cards, email addresses, phone numbers, online shopping accounts, and the like for your personal and professional expenses. This case of multiple personalities is vital to your bookkeeping and records and should be covered in your operating agreement.  

Also, if you want to form a single-member LLC, you still need to complete and submit formation certificates with your state and possibly other agencies.

If expansion is part of your strategic plan, you can hire employees to your now-established company. This requires amendments to your operating agreements.
We can do that for you and provide a host of other services, so contact Brinen & Associates to help get your single-member LLC up and running.

PRACTICE AREAS

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