Here is a quick overview of a Single-Member Limited Liability Company (SMLLC):
- For businesses with one owner
- Must keep business and personal funds separate
- Protection of personal assets if business is sued
- Income taxes filed with a Schedule C attached to your personal tax return
The single-member LLC is a great option for a single owner, who wants more liability protection than a sole proprietorship, but isn’t ready to take the leap to become an S Corporation.
If you properly keep your business and personal purchases separate, the LLC will limit your liability in the event that something happens and you are sued. It doesn’t make you invincible though. If the court decides that you haven’t kept things separate enough, it could break down that protection, and your personal assets could still be taken.
To create a SMLLC, you will register with your state. Each state has their own form, but it’s usually called “Articles of Organization” or something similar. In some states, the annual fees can be minimal (less than $200), but in others, like California, fees can be closer to the $1,000 range.
You would report your annual income and expenses exactly like a sole proprietor, by using the Schedule C.