Single-member LLCs are the most popular form of business entity for entrepreneurs embarking on a new solo venture. LLCs boast many benefits including their limited liability protection, low maintenance requirements, and flexibility to easily add or remove members.
Where to set up your Single-Member LLC
Most of our clients are local and will elect to file in New York. Setting up in your home state tends to minimize the set up costs and simplify tax issues. Setting up locally also helps to avoid multi-jurisdictional legal issues and avoid the costs associated with out-of-state business registrations. While some scalable startup companies may benefit from setting up in Delaware, most small businesses located in New York are better off filing in the State of New York.
How to set up a single-member LLC
Single-member LLCs are established in New York by filing Articles of Organization with the Department of State. The name of the LLC must be distinct from those currently in existence. Certain words are also restricted from being used in the company name for consumer protection purposes (school, bank, trust, title, etc.) Many people will also trademark the name of the new company, which helps to prevent other people from using their name or a similar name. Once the entity is established, the new entity must also fulfill the LLC publication requirement within 120 days. This involves running formation notices in the county in New York where the new LLC is located.
How are Single-member LLCs taxed?
LLCs are a flow-though entity by default. This means that the business profits or losses flow through directly to the business owner, unless the owner elects another tax option. If the business makes a profit, the single member is taxed on those earnings and reports them on his or her personal income tax statement at the end of the year by attaching a Schedule C. Similarly, losses also flow through directly to the sole member (the LLC formation fees and other startup costs are common tax write-offs).
Can I add new members to the LLC later?
Yes. LLCs are governed by their LLC operating agreement. This is a private contract among the members of an LLC. A new member can be added to an LLC by simply having the new member sign on to the LLC operating agreement in most cases.
Have questions? Give us a call at (212) 203-9975 for a free phone consultation if you’re interested in setting up a single-member LLC.