How to Form a Single Member LLC

Today, I want to talk to you about how exactly you form a single member LLC. This is a question that I've gotten from a lot of different people, and it's actually an easier process than you would think, but it's also fraught with peril if you do it the incorrect way.

Now, first of all, you want to make sure that an LLC is actually the right entity for your online business. And for some people it is, and for some people, it isn't. The threshold that I use is typically if you're making under 35 to $50,000 a year, then probably an LLC is going to be a good first place for your business. If you're making more than that, then you might want to look at being taxed as an S corporation and actually forming an S corporation, or electing S corporation tax status with your LLC.

Now, I don't want to get over your heads with this information because what you want here is exactly what do you need to do to form an LLC. And basically, what you need to do is you fill out what are called articles of organization in your state, and you're going to file those with your state Secretary of State's office. I know that sounds like a mouthful, but that's where you file them. And the reason I say you file them in your state is there's a whole bunch of reasons why you don't want to file this someplace else. I hear a lot of people say, “Well, shouldn't, we file them in Nevada or Wyoming or Delaware?” or places like this.

And frankly, that's whole lot of balarkey. Is that the right word, balarkey? That's a whole lot of nonsense. That's causing you, actually, more trouble than it's worth, because what happens when you do something like that, and you don't live in that state, is you still have to report all your income in your state, which means you still have to register your LLC because you're doing business in your state as a foreign entity in your own state. So, you're actually then causing yourself to pay two filing fees in some situations. So, not necessarily something you want to do, but that's the first thing you're going to do, is you're going to go ahead and you're going to fill out that articles of organization if you're doing an LLC, and you're going to file those with your state Secretary of State's office.

And then you're going to also pay the filing fees in your state, whatever those might be. Some states, they're more; some states, they're less. There might be some other legal requirements in your state. I know some states require that you actually publish notification in a newspaper. Some states don't require that. So, you need to check and make sure you're filing all the proper procedures in your state where you live, where you're going to be filing your LLC to make sure you do it the right way.

Now, once you've done that, once you've gone ahead and filed your articles of organization, once you've paid the filing fees… Is that it? Is that the only thing? No, it's not. There's another very important piece of the puzzle here, and that's to make sure that you get a standard. Well, not a standard, but you get an operating agreement in place. Even if you're a single member LLC, and this is very important, it doesn't matter… You don't need an operating agreement only when you have a multi-member LLC.

And basically, as an aside here, as an owner of an LLC, you're considered a member, so if it's just you, it's a single member LLC. If there's more than one of you, it's a multi-member LLC, so that's something you need to know. Now, you need to make sure that you get this operating agreement in place because what this is going to do, it's going to protect you against anyone coming in and suing you and reaching your personal assets. If you don't have something like this operating agreement in place, then you filed your LLC, yes, you're an LLC, but if you were to ever get sued, or if the business for ever gets sued, the LLC is really going to provide no protection, liability protection, to you at all.

And that's one of the main reasons that people file LLCs, is because they want that limited liability protection so that if somebody were to sue their business, that they can't come after their personal assets. That means your home, your car, your bank accounts, your assets in your home, anything like that. You want to make sure that nobody can come after that.

So, that's what you need to do to file your LLC, otherwise known as limited liability company. Hope you're having a great day, folks.

Scroll to Top