A single-member LLC operating agreement is a legal document between a company and its sole owner that sets the rules, purpose, and bylaws on how an entity will be run on a day-to-day basis. The main purpose of writing an operating agreement is to separate oneself from an entity for legal and financial liability.
Is an Operating Agreement required?
An operating agreement is required for a single-member LLC in California, Delaware, Maine, Missouri, and New York.
Main Purpose
Even though an operating agreement is not required (except in California, Delaware, Maine, Missouri, and New York), its main purpose is to provide a level of separation between the individual owner and the entity.
For example, if the entity is liable for any legal or financial damages to a 3rd party, they will most likely request the LLC’s documentation to prove it is truly a separate entity from the owner’s assets.
By State
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Missouri
- Montana
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Vermont
- Virginia
- Washington
- Washington D.C.
- West Virginia
- Wisconsin
- Wyoming
Templates (6)
eForms.com Version
NorthwestRegisteredAgent.com Version
Download: Adobe PDF
LegalTemplates.net Version
DelawareInc.com Version
Download: Adobe PDF
FreeForms.com Version
eSign.com Version
Paying Taxes as a Single-Member
An owner of a single-member LLC pays taxes on a pass-through basis. This means that the LLC will show its income, less expenses, with the net income “passing through” to the owner’s personal tax filing (on their IRS Form 1040).
How to File Taxes as a Single-Member LLC
If an LLC does not elect to be a corporation within its initial 75 days, it will be taxed as a partnership or “disregarded entity.” Therefore, the members will provide any income from the entity on IRS Form 1040 (Schedule C).
If an LLC does elect to be a corporation, the entity must file IRS Form 1120.
How to Pay Yourself as a Single-Member LLC
There are 2 ways to pay oneself as a single-member LLC:
- Salary – Commonly set up with a payroll provider and with payments made on a weekly basis. The net amount is paid to the member with deductions taken out for income (State and Federal), Social Security, and Medicare taxes.
- Distributions – Generally paid quarterly without Social Security and Medicare taxes (totaling 15.3%).
Single-Member LLC vs Sole Proprietorship
| LLC | Sole Proprietorship | |
| How to Register? | Must be incorporated through a form called an “Articles of Organization” and filed with the State. | A “trade name” or “fictitious trade name” must be registered through the State. Any business permits must be obtained through the trade name. |
| Partners Allowed? | No | No |
| Is an EIN Required? | Yes | No, unless there are employees. |
| Liability Protection? | Yes | No |
| Annual Renewal? | Yes | No |
| Filing Taxes | Can elect to be taxed as a partnership or corporation. | File taxes through their personal return. |
