David M. Steingold - Nolo’s Guide to Single-Member LLCs: How to Form & Run Your Single-Member Limited Liability Company

3rd Edition

How to Form and Run Your Single-Member Limited Liability Company

Attorney David M. Steingold

3RD EDITION OCTOBER 2022

Book & Cover Design SUSAN PUTNEY

Proofreading MARTHA C. BENCO

Index SONGBIRD INDEXING SERVICES

Printing SHERIDAN

Names: Steingold, David M., author.

Title: Nolos guide to single-member LLCs: how to form and run your single-member limited liability company / Attorney David M. Steingold.

Description: Third Edition. | El Segundo: Nolo, 2022. | Includes index.

Identifiers: LCCN 2022019364 | ISBN 9781413330137 (paperback) | ISBN 9781413330144 (ebook)

Subjects: LCSH: One-person corporations--United States--Popular works. | Sole proprietorship--United States--Popular works. | Private companies--United States--Popular works. | One-person corporations--United States--Management--Popular works. | Sole proprietorship--United States--Management--Popular works. | Private companies--United States--Management--Popular works.

Classification: LCC KF1380 .S74 2022 | DDC 346.73/0668--dc23/eng/20220714

LC record available at https://lccn.loc.gov/2022019364

This book covers only United States law, unless it specifically states otherwise.

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Accurate, plain-English legal information can help you solve many of your own legal problems. But this text is not a substitute for personalized advice from a knowledgeable lawyer. If you want the help of a trained professionaland well always point out situations in which we think thats a good ideaconsult an attorney licensed to practice in your state.

David M. Steingold is a private attorney currently based in Michigan. His practice covers multiple areas including business law. He has been an author for Nolo since 2012.

Its a great time to be the sole owner of a small business. Thats because changes in business laws have made the single-member limited liability company (SMLLC) an option in every state. In addition, when Congress passed the Tax Cuts and Jobs Act at the end of 2017, it included a new deduction for people who earn money through pass-through entities like SMLLCs. For SMLLC owners, the deduction could equal up to 20% of their SMLLC income.

This book will give you an overview of what is required to create and operate an SMLLC. The first chapter provides a general explanation of what an SMLLC is and why it may well be the best choice for your small business. Subsequent chapters cover things like formation, taxation, financing, protection from personal liability, and record keeping. Among other matters, this book will tell you:

• what forms and documents you need to create an SMLLC
• how to initially fund an SMLLC
• what your options are for managing an SMLLC
• how to prepare taxes for an SMLLC
• what forms and documents you have to file once your SMLLC is up and running
• what kinds of records you need to maintain for your SMLLC
• how an SMLLC will protect you in the event your business is sued
• what you need to do to maintain limited liability protection for your SMLLC, and
• what liability issues apply specifically to SMLLCs.

Throughout the book youll find tips, examples, and sample documents that help clarify the most important points.

This book strives to be both relatively compact and reasonably comprehensive. However, you may have additional questions or there may be issues specific to your situation that are not covered here. If so, you may want to consult with a legal or tax expert. Expert advice can help ensure that an SMLLC is the best choice for your business and that you have considered all the legal and tax issues that might apply to your particular situation. If you decide you want to form an SMLLC but you dont want to do the paperwork and filings yourself, Nolo has an online LLC formation service that will take care of everything for you, including creating a customized SMLLC operating agreement.

Whether you have already taken the plunge and created your SMLLC or are still deciding whether an SMLLC is right for you, this book has all the essential information youll need about what it takes to form, own, and operate an SMLLC.

Check the Nolo website at:

www.nolo.com/back-of-book/SMLLC.html

There is a page dedicated to this book where you can download forms from the Appendixes and check for updates to the information in this book.

Single-owner businesses have always existed in this country. Historically, they have been structured either as sole proprietorships or as single-shareholder corporations, both of which have certain drawbacks for small single-owner businesses. However, since the late 1990s, its become possible to organize these businesses as SMLLCs, a type of business entity which, for a single-owner business, has some advantages over both the sole proprietorship and the corporation. This chapter reviews those advantages and explains how organizing your business as an SMLLC may be the best option for you.

Every business has a legal structure. This includes everyone from a college student you pay to mow your lawn to an international telecommunications company you pay for cellphone service. The telecommunications company has likely organized as some type of formal business entityeither a corporation or an LLC. The college student, on the other hand, probably has not taken the trouble to file special documents to create a business entity, in which case he or she would be considered a sole proprietor (the default structure for a singleowner business).

Why an LLC?

Forming an LLC has become an increasingly popular way to create a formal legal structure for a small business. An LLC selectively combines some of the most desirable features of older, more traditional business structures like corporations, partnerships, and sole proprietorships. Those features include the limitation on personal liability that you get with a corporation and the pass-through taxation and flexibility of management that you get with a partnership or sole proprietorship. SMLLCs are LLCs with just one owner and they have the same combination of desirable features as multi-member LLCs. SMLLCs are specifically authorized by statute in every state.