Should I make a single or multi-member LLC? Candy J., Utah
If you are choosing between a single or multi-member LLC. It is almost always best to pick the multi-member LLC . In some states it is essential. However there can be reasons for picking a single member LLC. The best thing to do is to study the reasons and pick the best choice for your company.
For instance, if there is mo
re than one member in your LLC, then for legal and tax reasons, the property held in the LLC is considered owned by the business. If you are the sole member, then the property can be interpreted to be your asset. The courts and the IRS can come after those assets when you get in trouble. If there are multiple members, then those assets are considered property of the business and there will be no claim against them. Obviously this makes the choice between a single or multi-member LLC seem pretty clear.
However there is one slight advantage to a single member LLC. If you are the sole owner of the entity (single member LLC) you can choose to be taxed as a sole proprietor or corporation (C or S). If you are willing to be taxed as a “sole proprietorship,” then you don’t need to get an EIN (Employee Identification Number). You will still operate as an LLC, but it will be a “disregarded entity” in the eyes of the IRS. For tax purposes you will file a Schedule C on your 1040 return, just as if you were a sole proprietor. Yet, you will still have the liability shield of the LLC. The form of taxation has nothing to do with the liability shielding. So for a single member LLC, the taxes are easy and you get the liability shield. If you are choosing between a single or multi-member LLC, take a look at the LLC Wizard. It has a complete discussion to guide you to the right choice.
