A limited liability company is a form of business entity prized by small business owners for its flexibility. All states permit the creation of a single-member LLC, which is an LLC with only one owner. Unlike a corporation, which is required to have a board of directors and conduct meetings, maintaining the formalities of a single-member LLC is a much simpler process. After filing articles of organization, the owner of a single-member LLC must file with the local and state government, and the Internal Revenue Service.
File an articles of organization with the state business entity registrar. Typically, the state agency responsible for registering LLCs is the Secretary of State. While state requirements vary, you must typically choose a name for your LLC that contains the phrase “limited liability company” or the abbreviation “LLC." Additionally, you must choose a registered agent for your LLC, which is the party who will receive service of process if your LLC is sued or subpoenaed. The filing fee for articles of organization is between $50 and $350.
Obtain a Federal Employer Identification Number. The EIN is a unique identifying number assigned to your single-member LLC by the IRS. All LLC tax documents and the tax returns of any LLC employees or independent contractors must contain your LLCs EIN. The IRS provides an online form for obtaining an EIN for your LLC at no cost.
Register your LLC with the state tax collection agency. Many states collect corporate income tax on income realized by LLCs organized or registered with a state. The amount of corporate income tax varies by state, but is generally not more than 5 percent of LLC income.
File an application for a state business license. If your LLC will be engaged in retail sales or will be providing services, your LLC will likely be required to collect sales tax. You will likely need to disclose any business operations that your LLC will be engaged in, in order to determine which business operations will require the collection of sales tax. The state tax collection agency generally charges a nominal fee to obtain a business license.
Obtain any other required business applications from state and local government agencies depending on the type of business your LLC will be conducting. Typically, if your business will be engaged in selling food, firearms, automobiles or professional services, you will need to obtain other licenses before operating your LLC as an income-generating business.
File Form 8832 with the IRS. Form 8832 is the form used to elect how your LLC will be taxed. The IRS allows single-member LLCs to elect to be taxed as a corporation or to be disregarded. If your LLC elects to be disregarded, you must report any LLC profits and losses on your personal tax return.
File Schedule SE with the IRS. If you operate a single-member LLC, you must pay self-employment tax, which is used to fund social security and Medicare. The self-employment tax rate is 15.3 percent of LLC income.
Report LLC income and losses on IRS Form 1040. IRS Form 1040 is the tax return for individuals. You will need to file Schedule C to report any profits or losses from operating an LLC as a business, and Schedule E to report any supplemental income, such as income derived from real estate or intellectual property. You will need to file Schedule F if your LLC is engaged in farming and Schedule J if your LLC is engaged in fishing.
Successfully establishing and operating a single-member LLC may require the assistance of an experienced business attorney.
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