Many business owners and entrepreneurs wonder whether just one person can form a company in Delaware. The answer is yes. Whether you are looking to form an LLC or corporation, you can be the sole owner and operator of your business entity.
Can One Person Form a Delaware LLC?
Yes, a Delaware LLC can have just one Member. An LLC with only one Member is called a Single-Member LLC.
Most LLCs are actually Single-Member LLCs. This is because LLCs are easy for solo-entrepreneurs and small business owners to manage.
How Does a Single-Member LLC Work?
A Single-Member LLC has only one Member who is the owner and manager of the company. Single-Member LLCs are used for a variety of business purposes, from solo consultant businesses, side hustles, and real estate transactions.
How are Single-Member LLCs Taxed?
The IRS treats a Single-Member LLC as a “pass-through” for federal tax purposes. This means that the LLC does not actually pay tax directly on its business income.
Business income is passed down to the LLC owners personal tax return and taxed at their individual tax rate.
Single-Member LLC vs. Sole Proprietorship: Which is Better?
The primary difference between Single-Member LLCs and Sole Proprietorships is that LLCs provide their owners with limited liability protection. This means that LLC members are legally protected from liabilities or obligations associated with the business.
Sole proprietorships do not provide any liability protection. This means that business owners operating as sole proprietors are personally responsible for any debts and obligations incurred by the business.
By setting up a Single-Member LLC, business owners can put up a layer of legal separation between their personal finances and their business.
Does a Single-Member LLC Need an Operating Agreement?
Yes, a Single-Member LLC should still have an Operating Agreement, even if the company has only one owner.
The LLC Operating Agreement is the document that names the LLC Members and what their responsibilities are. Even though a Single-Member LLC only has one Member, the company should still have a written and signed Operating Agreement to protect the owner from legal liability.
Can One Person Form a Corporation in Delaware?
Yes, a Delaware Corporation can be owned and operated by just one person. You do not need multiple owners or business partners to start a corporation in Delaware.
In a corporation, one person can serve as the sole shareholder, director and officer of the company. Even if a corporation is run by one person, it is still important that the company follows corporate formalities. This includes submitting an Annual Report, holding an Annual Meeting, and keeping minutes of the meeting.
Failing to follow corporate formalities can result in the company’s shareholder losing their limited liability protection and being personally responsible for the company’s liabilities.