What Is a Single-Member LLC?
A single-member LLC is a limited liability company with one owner.
It is still an LLC under state law. "Single-member" simply describes the number of owners. The owner is generally called the member.
Is a single-member LLC different from a sole proprietorship?
Yes.
A sole proprietorship is not a separate state-law entity from its owner. A single-member LLC is an entity created under state law.
For federal income tax purposes, however, the IRS generally treats a domestic single-member LLC as disregarded from its owner unless it elects otherwise. That tax treatment is one reason the two structures are sometimes confused.
Read LLC vs. Sole Proprietorship
How is a single-member LLC formed?
The formation process is generally the same basic state process used for other LLCs:
- Choose an available LLC name.
- Designate a registered agent.
- File the state formation document.
- Address the operating agreement.
- Obtain an EIN if needed.
- Handle licenses, banking, ongoing filings, and insurance.
See How to Start an LLC.
Does a single-member LLC need an EIN?
It depends.
The IRS requires an LLC EIN in certain circumstances, including employment and certain excise-tax situations. A single-member disregarded LLC without employees or applicable excise-tax obligations may not need a separate EIN for federal income tax purposes, although it may obtain one for banking or because other requirements apply.
Should a single-member LLC have an operating agreement?
A written agreement can still document how the company is governed even when there is only one owner.
State requirements vary. See LLC Operating Agreement.
Keep business finances separate
A dedicated business account can make bookkeeping cleaner and help demonstrate that company finances are being handled separately from personal finances.
Read Business Bank Account for an LLC
Does a single-member LLC need insurance?
Having one owner does not eliminate business exposures.
The appropriate insurance depends on operations rather than the number of members. A single-member consulting LLC and a single-member contracting LLC can have very different risks.
For insurance-specific guidance, see the existing Single-Member LLC Insurance page.