Single-Member Limited Liability Company (SMLLC)

By Jason Watson, CPA
Posted Saturday, August 3, 2024

Single-member limited liability companies (what we abbreviate as SMLLC) are treated the same way as a sole proprietorship since in the eyes of most taxing agencies SMLLCs are considered a disregarded entity. Just as the name suggests, the entity is disregarded for tax purposes and all rental activities are reported on Schedule C or E with your Form 1040.

The disregarded entity stands in contrast to the pass-through entity (PTE) which are usually partnerships and S corporations.

While the IRS disregards the general SMLLC, several states have a separate form or filing. California uses Form 568. New York uses Form IT-204 LL. Texas has an annual franchise tax filing on Form 05-102 (even with their recent changes in reporting requirements, the public information report is still required). We can keep going but you get the idea.

Therefore, SMLLC equals sole proprietor from a federal income taxation perspective and most states. However, keep in mind that a SMLLC enjoys some distinct benefits over a sole proprietor such as liability protection, anonymity and improved transfer of ownership through its Operating Agreement.