Single member llc vs multiple member llc


A limited liability company (LLC) is a simple, flexible business structure that protects your personal assets from lawsuits involving your business. This business structure is the least complex and the most flexible. An LLC combines pass-through taxation of partnerships and limited liability of corporations. You can create an LLC by filing articles of organization with your Secretary of State and paying a filing fee that is typically between $100 and $500.

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To understand what a single-member LLC is, you must learn the fundamentals of this business entity.


Who are LLC Members?

An LLC member is an owner of the business. One member or many members together can own an LLC, called single-member or multi-member LLCs, respectively. Members are not limited to individuals, but can also include entities like corporations, other LLCs, and holding companies.

The LLC"s operating agreement explains who are the LLC members. It also details the rights and responsibilities of each of the members. These rights and responsibilities may also be defined by state regulations, which varies from state to state.

The business"s operating agreement also includes how members will make decisions for the LLC. For example, members determine from the beginning whether they need majority approval before making certain types of decisions. This is especially important if some members are more involved in the day-to-day operations of the business while others take on a more passive role. This is less important for single-member LLCs, which typically have one decision-maker unless there"s a separate manager.

Who are LLC Managers?

Managing members run the LLC. Straightforward enough. Their responsibilities include purchasing or selling property owned by the business, signing contracts, entering agreements on behalf of the business, and hiring and firing employees.

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LLC owners, again called members, run a member-managed LLC. In a multi-member, member-managed LLC, the managing members make day-to-day decisions but majority approval of the members might still be required for the bigger decisions. In contrast, the sole owner of a single-member, member-managed LLC runs the business and makes all the decisions.

Instead of being member-managed, both single-member and multi-member LLCs can instead be manager-managed, which means its run by someone other than a member or owner. The manager is typically hired from outside the LLC, and is responsible for routine and everyday decisions while the owner still retains final say on major decisions that will have a bigger impact on the business.

Most LLCs, especially small businesses with only a single member, are member-managed. If the single member is not onsite often, or owns another business that takes up his attention, the member may consider hiring someone else who can put the time and effort into managing what the sole owner is unable to give.

Taxation of Single-Member LLCs

Single-member LLCs can file taxes as a sole proprietorship or a corporation. If they file as a sole proprietorship, or a “disregarded entity," they are not required to file a separate tax return for both themselves and their business. They can just report the income from their business on a Schedule C form along with the rest of their taxes.

If you are ready to form a single-member LLC, whether member- or manager-managed, or any other form of LLC, an online service provider can do it for you.

This portion of the site is for purposes only. The content is not legal advice. The statements and opinions are the expression of author, not, and have not been evaluated by for accuracy, completeness, or changes in the law.