Single Member LLCs
A single member LLC is just what it sounds like. An LLC that has only one member (a "member", when discussing LLCs is equivalent to a "shareholder" in a corporation). In the past, there was debate in the law whether a single member LLC was even legal. This has been cleared up, as most states permit single member LLCs.
How A Single Member LLC Is Different
Even so, there are a few practical differences between a more traditional multi-member LLC and single member LLCs. For one, there is a thought among attorneys that single member LLCs are more vulnerable to having their veil pierced that multi-member LLCs.
Piercing The Single Member LLC
Veil-piercing, if you are unfamiliar with the concept, is one of the worst things that can happen to a business entity such as an LLC or corporation. What it means is that the court will ignore the business entity and the limited liability protection it offers its owner. Instead, the owner we be personally liable for business debts. These debts can be any debts the business owes--from legal judgments to loans.
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While the mere fact of being a single
member LLC is not sufficient alone for a court to disregard the
corporate form, there is anecdotal evidence that single member LLCs are
more likely to have their veil pierced by a creditor.
Single
Member LLC Tax Treatment
Secondly, single member
LLCs are treated differently for federal income tax purposes than
multi-member LLCs. For federal tax purposes, the single member LLC is
ignored and the owner simply reports income and expenses on Schedule C
of his or her 1040. If an LLC is owned by a married couple, they might
qualify to file as a single member LLC and simply use Schedule C on the
1040 rather than filing a partnership tax return.
Filing Taxes For Your Single Member LLC
It's called TurboTax Online Home & Business. As of 2008, the price is $99.95 for federal returns, plus $34.95 for state.
Efile is included for free as is their service which helps you identify over 350 business expense deductions you've probably overlooked.
TurboTax's interactive question and answer format guides you through the tax return and helps you identify potential deductions.
Instead of trying to memorize J.K. Lasser's tax encyclopedia (which is a good resource), Turbotax asks you simple questions like "Did you sell a home during 2008?" and tailors its followup questions based on your answers.
Get started with Turbotax Home & Business for your single member LLC here.
Note: If you have a multi-member limited liability company, you will want to use Turbotax Business, found here.
And so are you! To pay the least amount of taxes you are legally obligated to pay, you need a book of specialized information...you need the Ultimate Tax Guide. This book is not written for salaried wage earners or big corporations--it's focused entirely on the needs of small business owners and the self-employed.
A multiple member LLC, by contrast, will file as a partnership. To file your LLC tax return, with multiple members, use IRS Form 1065.
Other Articles of Interest
Find out if your state allows single member LLCs
Visit LLC Made Easy's state by state listing of LLC requirements, including filing fees.
Keep track of your business expenses and
Double Taxation
Learn about the C corporation's double tax and how to avoid it with an LLC.
Return to LLC Made Easy Home
What Other Visitors Have Asked
Click below to see questions from other visitors to this page...
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