Single Member Limited Liability Company

Jason Watson, CPA

1 year ago

single member limited liability company By Jason Watson, CPA
Posted Wednesday, October 18, 2023

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 business activities are reported on Schedule C and your Form 1040.

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 05-163. 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 and improved transfer of ownership through its Operating Agreement.

Jason Watson, CPA, is a Senior Partner of WCG CPAs & Advisors, a boutique yet progressive tax, accounting
and business consultation firm located in Colorado serving small business owners and taxpayers worldwide.

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