Single Member Limited Liability Company
by Alison Cole
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Several states permit the formation and operation of a single-member Limited Liability Company (LLC). The question that arises automatically is why anyone should register himself as a LLC when he can run the business as a sole proprietary concern. The answer is simple - with a LLC he obtains limited liability protection, which means that for liabilities arising from the business, his personal assets cannot be touched. In fact, certain people exploit this position by contributing only their risky assets to the LLC and keeping the rest outside its scope.
A single-member LLC is taxed as a proprietorship. The profits of the LLC are added to the other income of the interest holder. The profits and losses can be reported on your personal tax return, in schedule C.
Even for a single-member LLC it is prudent to have an operating agreement to distinguish it clearly from a sole proprietary concern. The lenders may like to look at the operating agreement before taking a decision on your loan application. This is also likely to be helpful in case of lawsuits. The document has to be signed by the single member twice, for himself and on behalf of the company.
An additional advantage of a single-member LLC is that the interest in the company can be transferred to a beneficiary (for example, your son), without paying gift taxes. Even after such a transfer you can continue to control the company by being appointed as ‘manager'. Check the details with your tax consultant.
Registration of a single-member LLC is pretty much like the procedure for a multi-member version. The necessary papers are to be filed with the Secretary of State who has jurisdiction over the area where your company is to be set up. There may be some minor differences in the forms. The required forms and checklists can be bought as standalone documents or in combo packs. If you like, you can consult a professional. There are several experts available.
Limited Liability Company Act provides detailed information on limited liability company, limited liability company act, limited liability company advantage, limited liability company form and more. Limited Liability Company Act is affiliated with Laws on Forming an LLC.
Article Source: www.homehighlight.org
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