How to Start a Single-Member LLC? (In-Depth Guide)
Setting up a single-member LLC only involves six steps, but what you need to do and what fees you'll pay differ depending on your state.
In my 9 years of helping solo business owners get set up across dozens of states — from the initial paperwork to getting your tax ID and protecting your personal assets — I've seen where people get tripped up and what makes the process go smoothly.
This guide breaks it all down, step by step.
Quick Summary
- To start a single-member LLC, you need to choose a business name, file the required documents, hire a registered agent, obtain an Employer Identification Number, and register your LLC with the state.
- It's essential to hire a registered agent and open a business bank account to maintain the LLC's legal and financial separation from personal assets.
- IRS numbers show more people are choosing LLCs every year — with 3.3 million new ones filed in 2023. That's 72.7% of all U.S. partnerships for 22 years straight, proving why solo business owners love this setup so much [1].
- In my experience, the simplicity and protective structure of a single-member LLC make it an unbeatable choice for solo entrepreneurs seeking legal security and tax efficiency.
How to Form a Single-Member LLC?
To form a single-member LLC, follow state requirements and file the necessary documents. The process involves the following steps:
Step 1: Choose a Suitable Business Name
Conduct a business name search to determine if your preferred LLC title is available.
Step 2: File the Required Documents
File the Articles of Organization with the Secretary of State office and draft an operating agreement.
Step 3: Consider Hiring a Registered Agent
You may want to consider hiring an LLC registered agent to receive important legal documents on your behalf (such as service of process).
You can also hire an accountant or lawyer to handle legal matters.
Step 4: Obtain an Employer Identification Number (EIN)
Obtain an LLC Employer Identification Number (EIN) by filing Form SS-4 with the IRS.
Although it is not required, it is advisable to apply for one to open a business bank account and maintain limited liability protection.
Step 5: Open a Business Bank Account
Open an LLC business bank account in the name of the SMLLC to separate business funds from your assets.
Step 6: Register Your Single-Member LLC
Determine the cost and timeline for forming your SMLLC. Filing fees now range from $35 to $500 depending on the state, with an average of around $132. Processing times vary as well — some states process filings in as little as 2 business days, while others can take 3–5 weeks [2].
If you want to speed up the process, you may want to discuss it with a service provider like ZenBusiness or a different professional.
Forming a Single-Member LLC: What You Need to Know
Forming a single-member LLC has special considerations since it is not regarded as a typical limited liability company.
If you choose to form a SMLLC, you are not required to file any additional tax forms or pay annual fees.
However, if the LLC has income that it receives, this income becomes taxable to the single member, whether he or she draws it out as a salary or leaves it in the business entity.
A SMLLC is not required to have an Employer Identification Number (EIN), but it is advisable to obtain one for legal transactions. You may need one to open a bank account or secure a loan.
An LLC operating agreement may seem unnecessary since there is only one member, but there are advantages to drafting one.
However, the document outlines key information, including the purpose, operations, and management, about the LLC and keeps the business on track. It could be used to protect your company if any legal issues arise.
You can act as your own registered agent for your SMLLC. You will need to provide a service of process and correspond with legal agencies and clients.
Benefits of Forming a Single-Member LLC
If the LLC is owned by just one individual, forming a single-member LLC, also known as a "disregarded entity," is often the preferred option.
Benefits of establishing an SMLLC include:
- Credibility
A SMLLC establishes credibility compared to a sole proprietorship since an SMLLC is categorized as a company. Professionals handle the formation, legality, and structure.
- Lower Fees
Because there is no requirement to file an LLC annual report, an SMLLC will likely cost less than other LLCs to maintain each year.
- Privacy
Single-member LLCs can protect their members' assets from business lawsuits and claims because they do not have to disclose the member's assets to the public.
"To be successful you have to have your heart in your business and your business in your heart."
-Thomas J. Watson, Chairman and CEO of IBM
How to Keep Your Single-Member LLC's Liability Protection Intact
Forming your SMLLC is only half the job — courts can strip away your liability protection if you don't treat the business as a separate entity. This is called "piercing the corporate veil," and single-member LLCs are especially vulnerable because there is only one person running the show.
To stay protected, run all transactions through your dedicated business account, pay yourself through formal distributions, and keep basic records of major business decisions. Skipping these steps is one of the most common — and costly — mistakes solo LLC owners make.
How Is a Single-Member LLC Taxed?
A sole proprietorship LLC is subject to LLC pass-through taxation. If you are a U.S. taxpayer, forming an SMLLC will grant you the ability to choose how your business entity is taxed for federal purposes.
Single-member LLCs are treated as disregarded entities for federal income tax purposes, which means the entity does not file its own taxes [3]. At the same time, it can still be classified as a C or S corporation.
This means that business taxes are treated as personal taxes, and the owner of a single-member LLC must pay taxes on any income that is left in or taken out of the business.
FAQs
Why Should I Choose A Single-Member LLC Over Other Business Structures?
You should choose a single-member LLC over other business structures because a limited liability company offers personal asset protection and has tax benefits.
What Paperwork Will I Need to Complete to Form a Single-Member LLC?
The paperwork you will need to complete to form a Single Member LLC includes Articles of Organization, an Operating Agreement, and the necessary state requirements. Check with your business attorney or state official for more details.
Is My Single-Member LLC Considered a Separate Entity From Me?
Your single-member LLC is not considered a separate entity from you. That means that your LLC will be treated as a sole proprietorship for tax purposes, and all business income will flow directly to single-member LLC owners.
References:
- https://www.irs.gov/pub/irs-pdf/p1136.pdf
- https://www.shopify.com/blog/llc-cost
- https://www.irs.gov/businesses/small-businesses-self-employed/single-member-limited-liability-companies
