Filing your LLC - Single Member vs. Member Managed
LLC’s are a great vehicle to protect your personal assets as you grow your business. Before registering your LLC, here are some things you should consider.
We typically advise clients with growing small businesses to form an LLC. LLCs require less management time and resources when compared to corporations. Additionally, LLCs offer personal asset protection since they are considered a separate entity. However, it should be noted that LLCs formed in some states have additional taxes. For instance, in California there is a $800 minimum required fee to California Franchise Tax Board for every LLC.
We have seen many clients who formed an LLC as Member Managed as opposed to Single Member aka One Member LLC.
They will typically be a single owner for the foreseeable future – no additional investors, members, or owners.
This is an important distinction for one main reason- the cost associated with filing.
All member-managed LLCs need to have separate federal returns filed. This means that the owner of the LLC has to file two tax returns - one for the LLC and one for themselves. This will inevitably cost the owner more time and money.
A Single Member LLC owner files federal taxes for the LLC directly with their personal tax return.
Unless you see future investment, additional owners, and members, we strongly encourage Single Member LLC’s.
Book your appointment today for Business Formation Consulting and Filing.
What people are saying about Strategic Tax Relief
Questions or concerns regarding your IRS situation? Contact us immediately for a FREE no-obligation consultation at (818) 230-5710 or Info@IRSRelief.Tax