Can one person form a Corporation or an LLC?
Yes, one person can form an LLC in Delaware, which is known as a “single-member LLC”.
What Is a Single-Member LLC?
A single-member LLC has only one Member and can be used for a variety of business purposes, such as solo consultant businesses and real estate transactions.
For federal tax purposes, a single-member LLC is considered a “pass-through entity”, meaning business income is passed down to the owner’s personal tax return rather than being taxed directly.
Difference Between Single-Member LLC and Sole Proprietorship
A single-member LLC is not the same as a sole proprietorship. The primary difference between sole proprietorships and single members LLCs is liability protection.
In a sole proprietorship, the owner is personally liable for the debts and obligations of their business. A single member LLC provides owners with a limited liability protection, keeping the personal assets of owners separate from business liabilities.
Does a Single-Member LLC Need an Operating Agreement?
Yes, a single-member LLC should have a written Operating Agreement.
Delaware law requires LLCs to have an Operating Agreement that is either written or verbal. However, having a written and signed Operating Agreement can better protect the owner’s personal assets and provide proof of ownership in the LLC. Banks often request a copy of an Operating Agreement when opening a business account for an LLC.
Can one person form a Delaware corporation?
Yes, one person can form a Delaware corporation and act as the sole stockholder, director and officer. However, it is important to follow corporate formalities, including holding annual meetings and keeping minutes of those meetings. Failure to follow formalities can result in the sole stockholder being held personally liable for the corporation’s liabilities.