Single Member LLC Definition
An LLC's owners are referred to as Members. Accordingly, a Single Member LLC is a limited liability company with one member or owner. SMLLCs have a bad reputation because judges in many states view them disparagingly. They are more likely to have an adverse ruling with the judge declaring the company and the person are one and the same. You thus become personally liable for the company's debts.
Why Choose an LLC in Wyoming?
Wyoming is the only state which specifically protects single-member limited liability companies by statute. This legislation has since been upheld by the courts. This came about in part due to cases such as Greenhunter Energy, Inc. v. W. Ecosystems Tech, Inc.
In that case, a WY judge made an adverse ruling against a holding company's subsidiary and assigned the debt to the holding company. To prevent this issue from occurring again, the Wyoming legislature amended the LLC Act to make piercing the veil more difficult. Today, WY is the only state to explicitly state single and multi-member LLCs must be treated the same. The result is Wyoming LLCs provide unique asset protection benefits.
Who Uses SMLLCs?
The most common are small business owners and holding companies. Small business owners would often get around this issue by gifting or selling 5% of their company to someone else. This 5% threshold was often viewed as being significant enough to allow the business to enjoy multi-member LLC benefits. Wyoming does not force you to do this however. You may own 100% of your venture while enjoying the same benefits.
Every subsidiary of a holding company is also a SMLLC. The single member being the holding company. This led many to adopt sibling holding company structures rather than parent-child structures. Fortunately, both models work equally well in Wyoming. We have further details on our Wyoming holding company page.
Consider Wyoming's Close LLC
A Wyoming Close LLC was designed with single owner companies in mind. They have reduced operating formalities which make staying in compliance easier. One example is not requiring an annual meeting. Other LLCs require this even if there is only one owner. This may seem silly as you are the only person attending the "meeting", but it is still required to stay in compliance. With a close limited liability company, however, you do not have to worry.
Single Member Operating Agreement
An operating agreement is a contract between members. If there is only one member, then do you still need an agreement? The answer is yes. There are a few reasons, but the most compelling is for estate planning. If you pass away without a plan, then the company will be probated. This starves it of cash and kills most businesses. Our operating agreements contain a transfer on death provision. This allows you to name a beneficiary. The company does not need to be in a trust and can bypass probate. Follow our link for a longer discussion of why you need an operating agreement.
Single Member LLC Taxes
The default status with the Internal Revenue Service is as a disregarded entity. This classification may be changed to s-corp, partnership or c-corp taxation. This tax flexibility makes limited liability companies easier to work with than corporations.
How other states treat single member limited liability companies has given them a bad reputation. Fortunately, Wyoming extends a warm hand to small businesses. It is still important to observe corporate formalities however. Being the sole member is not an excuse to ignore best practices. You may lighten your load somewhat with a close LLC, but you should still keep proper books etc. Learn more on our page about forming LLCs in Wyoming and our page on their nation leading benefits.
Frequently Asked Questions
An LLC and SMLLC are the same, the difference simply refers to how many members there are. A Single-Member LLC has only one owner/member, whereas a non-single has multiple.
A SMLLC, or Single-Member LLC, is taxed as a Sole-Proprietorship, however for asset protection and privacy purposes they are not the same. A SMLLC is a legal entity and sole-prop is not.
Yes, a SMLLC can have employees. The single-member can also be an employee of the LLC if so desired. It is important to form the SMLLC in a state that is friendly, though, such as Wyoming.
An LLC is always a wise decision when running a business that is more than a hobby. The fees due are generally less than what can be saved on taxes, plus there is limited liability protection.