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Benefits and Disadvantages of a Single Member LLC

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Core Group

Are you thinking about becoming a single-member LLC

With a single-member LLC, you are your own business. Unlike a sole proprietorship though, you have a distinction between yourself and the business.

You can have a single-member LLC in all states, but it comes with its own pros and cons. Before you make a decision about how you're going to label your business, we're here to talk about them.

Keep reading to learn all about single-member LLCs so you can make an informed choice about your business moving forward.

Pro: Taxes

Taxation is often simpler when you're working as an LLC. 

You don't have to file your taxes as a corporation. Instead, you file them just as you would file personal taxes. You don't have to pay for corporate taxes as you would in other setups. 

This is also easier to set up if you're trying to file your own single-member LLC taxes instead of having someone else do it. 

You should still stay informed about your single-member LLC tax rate before you dive into your new project. It's best to hire a professional for your first year of taxes. 

Con: Higher Costs

There are higher startup costs if you're aiming for an LLC. While a sole proprietorship is free from startup or annual fees (aside from those that are tied directly to their business), you may need to pay a filing fee and an annual franchise tax (depending on the area where you're trying to develop your business. 

How To Lower Taxes Strategically-Download Now

Pro: Liability

When it's spelled out, single-member LLC actually means single-member limited liability company. In this way, it makes sense that you will have limited liability.

When you're with an LLC, your personal funds and belongings shouldn't be at risk when something goes wrong with your company. You shouldn't inherit your company's debt. 

This takes some careful work on your part, though. You need to make yourself a separate entity from your business, at least on paper.

Use different devices for work vs personal time and keep separate bank accounts. If you slip up, you may find yourself liable by accident. 

Con: Not As Secure As You Think 

Speaking of liability, the limited liability factor doesn't mean that you can't have any liability at all. It's a case-by-case situation. 

You need to keep careful records of your business from spending to earning. As a single person, you're responsible for keeping records on file. 

If you're not careful, and you've been taken to court, a judge may decide to "pierce the corporate veil," so to speak, and hold you personally responsible for all business debts. 

Are You Going to form a Single-Member LLC?

There are plenty of good reasons to work as a single-member LLC, but it's not for everyone. There's a lot of work and careful tracking involved if you want to be successful and avoid any potential problems along the line. 

That said, a good financial expert can make all of this easier. 

We want to help you navigate the process so you don't get caught with any unexpected problems. Check out our services and contact us today to get started.


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