Single-Member LLC: How It Works, Taxes and Setup

A single-member LLC is a limited liability company with exactly one owner. That owner can be a person or another company. Legally it is a separate entity from its owner, so the company's debts and lawsuits generally stop at the company's assets. For federal income tax, though, the IRS ignores it by default: the profit goes on the owner's own return, much as it would for a sole proprietor. That split, separate for liability and invisible for income tax, explains almost everything about how a single-member LLC works.

What a single-member LLC is

There is no special filing for a single-member LLC. You form an ordinary LLC with the state, and it is single-member because it has one member, the term for an LLC owner. Every state allows it. The state filing fee is the same as for any LLC, from $35 to $520 depending on the state (median $100), and the company keeps the same duties: a registered agent, and in most states a recurring report. The general mechanics are in what is an LLC.

The one owner can be an individual, such as Dana Ruiz forming Ruiz Design LLC for her freelance work. It can also be a company: a corporation or another LLC can be the single member of a subsidiary LLC that holds one property or one line of business. How that structure works is in can an LLC own another LLC. A married couple who both hold an interest generally have two members, not one, which changes the tax picture covered below (community property states have an exception).

How a single-member LLC is taxed: a disregarded entity

By default the IRS treats a single-member LLC as a disregarded entity: for income tax it is disregarded as separate from its owner. The IRS page on single-member LLCs says that, unless the LLC elects otherwise, an individual owner's LLC activity goes on the owner's Form 1040:

• Schedule C for a business, such as consulting, a shop or a trade.
• Schedule E for rental real estate and other supplemental income.
• Schedule F for farming.

If the owner is a company, the LLC's activity is reported on that company's return as a branch or division. Either way the LLC files no federal income tax return of its own. It still files whatever its state requires, which in some states includes an entity-level tax or fee.

An individual owner who runs the business pays self-employment tax on it in the same manner as a sole proprietor. The IRS sets the rate at 15.3%: 12.4% for Social Security on combined wages and net earnings up to $184,500 for 2026, and 2.9% for Medicare with no cap. An extra 0.9% Medicare tax applies above $200,000 for a single filer. It is figured on Schedule SE once net earnings reach $400, and half of it is deductible in figuring adjusted gross income (source: IRS, self-employment tax). The owner is not an employee of a disregarded LLC, so nothing is withheld from what the owner takes out. Many owners instead make estimated tax payments on Form 1040-ES, which the IRS generally expects from individuals who will owe $1,000 or more, in four payment periods a year. How owners take money out is in how to pay yourself from an LLC, and the returns and due dates are in how to file LLC taxes.

Electing corporation or S corporation tax

The default is a choice, not a rule. A single-member LLC can file Form 8832 to be taxed as a corporation, which then files its own Form 1120 and pays corporate income tax. Or it can file Form 2553 to be taxed as an S corporation; IRS Publication 3402 says that filing Form 2553 on its own is treated as the election to be a corporation too, so Form 8832 is not needed first. Form 2553 is due no more than 2 months and 15 days after the start of the tax year it is to take effect, or at any time in the year before. After a classification change on Form 8832, the LLC generally cannot change again for 60 months.

Under S corporation treatment the owner who works in the business is paid wages through payroll, and Social Security and Medicare tax apply to those wages rather than to all of the profit. The trade-off is payroll, a separate Form 1120-S return and more bookkeeping every year. Whether that comes out ahead depends on profit, the salary and the state, and a CPA or tax preparer can run the numbers; the mechanics are in LLC vs S corp. Nothing about the election changes the LLC at the state level: it keeps its articles, agent and report.

Single-member LLC vs sole proprietorship

A single-member LLC is not a sole proprietorship, although by default the two are taxed the same way. A sole proprietorship is not an entity at all: it is simply you, doing business, and every debt and judgment of the business is yours personally. A single-member LLC is an entity the state created, so a supplier's unpaid invoice or a customer's lawsuit against Ruiz Design LLC is generally a claim against the company's assets, not Dana's house or savings.

That protection has limits worth knowing. It does not cover your own negligence or anything you personally guarantee, such as a lease or a loan the bank makes you sign for. And a court can disregard the LLC, which lawyers call piercing the veil, when the owner treats the company as an extension of themselves. With one owner the risk is real, because nobody else is watching the money. The habits that keep the line clear are simple:

• A separate bank account in the LLC's name, with no personal spending from it and no business income paid into personal accounts.
• Contracts, invoices and the website in the LLC's full legal name.
• Enough money in the company to pay its expected bills.
• Money moving between you and the LLC recorded as a draw, a contribution or a loan.
• The state report filed and the registered agent kept current.

The full comparison, including cost and paperwork, is in LLC vs sole proprietorship.

The operating agreement still matters

With one owner there is nobody to disagree with, so many owners skip the operating agreement. It is still worth having. Banks often ask for one to confirm who controls the account. It is the strongest evidence that the LLC is a real company run under its own rules, which matters if a creditor ever argues otherwise. And it is where you say what happens to the company if you die or cannot run it, for example by naming a successor or a person who can step in, which saves your family from guessing. A few states require LLCs to have one. What it covers is in do you need an operating agreement.

How to set up a single-member LLC

The steps are the same in every state; the forms, fees and names change.

1. Pick the state. For a business run from where you live, that state is usually the right one: an LLC formed elsewhere generally has to register in your home state as well, and pay both states. When another state is worth it is in best state to form an LLC.
2. Choose and check the name. The name must end in LLC or an allowed variation and be distinguishable from names already on the state's records. Search the state's business database before you file; the rules are in LLC name rules.
3. Name a registered agent. Every LLC needs a registered agent with a street address in the state who is available during business hours. You can be your own if you have an address there, though your address then goes on the public record.
4. File the articles of organization. The formation document, articles of organization in most states, asks for the name, the agent, an address and sometimes whether the LLC is member-managed or manager-managed. A single owner usually chooses member-managed. Pay the state fee and the state returns the filed document.
5. Sign an operating agreement. A single-member agreement can be short: you own 100%, you manage the company, how money comes out, and who takes over if you cannot.
6. Get the LLC's EIN when it needs one. Whether a disregarded single-member LLC needs its own EIN depends on what it does; the next section sets out when the IRS requires one and when banks ask for one anyway.
7. Open the bank account and register for state taxes. Open the account in the LLC's legal name and use it for every business dollar. Then register for the state taxes the business owes: a sales tax permit if you sell taxable goods or services, a withholding account if you hire, and any local license. The full list is in what to do after forming an LLC.

One filing you can skip: an LLC created in the United States no longer files a federal beneficial ownership information (BOI) report. FinCEN's final rule, effective August 14, 2026, made the exemption for U.S. companies permanent; the report now applies only to foreign companies registered to do business in a state.

Whose tax number a single-member LLC uses

Because the IRS disregards a single-member LLC for income tax, the income is reported under the owner's number: the owner's Social Security number, or the owner's EIN if the owner has one. The IRS says a disregarded LLC with no employees and no excise tax liability does not need an EIN of its own. It does need one in these cases:

• Employees. For employment taxes the IRS treats the LLC as a separate entity, so payroll is reported and paid under the LLC's own name and EIN, even though its income still goes on your Schedule C.
• Excise taxes. The same applies when the LLC has to file a federal excise tax form the IRS lists, such as Form 720 (quarterly federal excise taxes) or Form 2290 (the heavy highway vehicle use tax).
• A tax election. An LLC taxed as a corporation or an S corporation files its own return and needs its own EIN.

Outside those cases the EIN is optional for tax purposes, but in practice most single-member LLCs get one early. The IRS itself notes that an LLC may need one to open a bank account, and most banks ask for the LLC's EIN before they will open an account in its name. Some states also require the LLC to have a federal EIN for their own tax registrations. And an EIN is what lets you hire later without changing anything else.

Clients who pay you will ask for a Form W-9. On the current form a disregarded LLC puts the owner's name on line 1 and the LLC's name on line 2, and enters the owner's Social Security number or the owner's EIN; an LLC taxed as a corporation enters its own EIN (see the IRS Form W-9 page). Many owners prefer not to hand their Social Security number to every client, which is one reason they get an EIN. How each line is filled in is covered in filling out a W-9 for an LLC.

What changes when a second member joins

When a single-member LLC takes on a second member, it stops being a disregarded entity. Under IRS Publication 3402 it becomes a partnership for federal tax, unless it has elected corporate or S corporation treatment, in which case it stays a corporation for tax. A partnership files Form 1065 each year and gives each member a Schedule K-1, and it reports under an EIN of its own. Whether the number the LLC already has can carry over depends on how it was issued, which a CPA or the IRS can confirm.

The paperwork changes too. The operating agreement needs to be rewritten for two owners: ownership percentages, how profit is split, who decides what, and what happens when one wants out. Some states list members on the formation document or the recurring report, which then needs an amendment or an update. Spouses are a common case: in most states a married couple who own an LLC together are two members and file as a partnership, though in a community property state they can choose to keep it a single-member LLC for tax. How a multi-member LLC is taxed and run is in multi-member LLC.

Single-member LLC fees in the ten largest states

The state charges a single-member LLC the same as any other LLC. Here is what the ten most populous states charge to form one and keep it in good standing.