If you have your own business, it always makes sense to incorporate. This protects the owners of your company in the event of a legal dispute by keeping the owners’ personal assets separate from those of the business. The same is true, even if you are the business has no employees. Forming a single member LLC—another name for an LLC that consists of just one person—offers the same perks as forming an LLC when you have a larger owner group.
But it’s only natural to have questions, like how to become an LLC and what it will do for you and your business. Here’s what you need to know.
Why Form a Single Member LLC?
Technically, anyone can become a single member LLC. But freelancers, contractors, photographers, and musicians may choose to become a single member LLC to legally separate their professional operations, from their personal assets, like their home, car, and savings. In the event of an issue with your business, your personal assets are considered separate and legally inaccessible to creditors.
Becoming an LLC can also lend prestige to your business, even if that business is you. It enables you to make tax elections, to lower your effective tax rate. Another nice perk of single member LLCs: you can expand your LLC to include more members if your business grows in the future.
How Do You Become an LLC, Exactly?
IncNow and some other registered agents make the process of becoming an LLC easy for you. In general, you’ll want to follow these steps:
- Decide on a name for your company. It can simply be your name, or it can be a more typical company name that reflects the work that you do. That name should end in “LLC”.
- Check the availability of your company name. IncNow can check the name with the state of formation for you, as well as a second choice, if you are considering alternative names.
- Select a registered agent. Many people choose to incorporate their companies—including single member LLCs—in Delaware due to its business-friendly laws. While you don’t need to live in Delaware to have a Delaware LLC, you do need to have a registered agent in the state of Delaware. This is a person or company who forwards correspondence from the state to you. IncNow can help serve as your registered agent for a small fee.
- Fill out an online form. Just provide basic information, like your company name and your contact information. The whole process takes five minutes or less. You’ll be issued a filed copy of your Delaware certificate of formation after the state of Delaware approves it.
- Create your single member LLC operating agreement. This is an important step that’s often overlooked. Single-member LLCs should have an operating agreement. This written document establishes that you are separate from your business entity, and that you are the owner and manager of your LLC.
Becoming an LLC is an easy and inexpensive way to protect yourself from personal liability for business obligations. It’s definitely worth considering if you have your own business—even if that business is you. Plus you can tell your friends, relatives, and more importantly, your customers and vendors, that you are a business owner.