The Single Member LLC is one of the most effective and useful legal entities out there for sole business owners. It is the best way for you to get limited liability protection, maintain a single layer of taxation, and have an easy to maintain and operate professional entity for your business.
Before the single member limited liability company existed, a sole business owner could not get all of these benefits in one place. But soon after it became available, the single member LLC is the most popular of all limited liability companies formed each year.
There are two differences that you should be aware of when it comes to comparing a single member LLC and a multi-member LLC.
Difference #1 is that a single member LLC does not need as many governance processes as a multi-member LLC. Accordingly, if you review most standard LLC operating agreements out there, you will start to wonder how they apply to you as a single member LLC.
The answer is that many of the standard provisions in your typical LLC Agreement form are not necessary or relevant for a sole owner business. Now, if you are planning on later adding other members, it does make sense to use a multi-member LLC Operating Agreement now so that you have the necessary structure in place later when you need it. We offer a professional standard LLC Operating Agreement for these situations.
But, if you know your business is and will always be owned by just you, there is no need to subject yourself and your business to unnecessary processes and complexity. Our Single Member LLC Operating Agreement is specifically designed for the single owner LLC business.
Our form is based on the agreement used by one of the most prestigious national corporate law firms in the country. They use this form hundreds of times a month as they form single owned limited liability companies for their thousands of business clients.
Difference #2 The second difference between a single member LLC and a multi-member LLC is that a single member LLC is subject to more risk of being pierced in the event of a lawsuit.
What is piercing? It is when someone sues your business and then tries to convince the judge in the lawsuit to pierce the LLC layer of protection and hold you personally liable for the liability in question. Now, the law is quite clear that members are not personally liable for the debts and obligations of an LLC business.
But some lawyers, especially with a single member LLC involved, are successful in getting around this basic principle by using creative arguments. One creative argument is that the owner may have formed an LLC but then he or she did not properly maintain it and, when running the business, that person acted as if the limited liability company did not exist. This argument comes down to "If the owner himself ignored and did not honor the existence of the LLC, why should the judge do so. . ."
The solution is that you as a single member LLC must always ensure that it is your limited liability company running your business and you must maintain proper written paperwork showing that the LLC is being governed and making decisions properly. T his is done with proper governance paperwork.
Our Single Member LLC Operating Package includes the standard forms that you can use regularly in your LLC business to maintain the proper formalities so you can easily fight any arguments of piercing should you or your business ever be sued.
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