What is a Single-Member LLC?
A single-member LLC (Limited Liability Company) is a legal entity with one owner. The IRS treats it as a "disregarded entity" — meaning it's taxed exactly like a sole proprietorship. The advantage is legal liability protection: the LLC creates a barrier between your business and personal assets.
How It's Taxed
Exactly the same as a sole proprietor. Income and expenses go on Schedule C. Net profit flows to Schedule SE for self-employment tax (15.3%).
The IRS ignores the LLC for tax purposes — it's a state-level legal structure, not a federal tax classification.
Pros
- Liability protection — your personal assets are shielded from business debts and lawsuits (if the LLC is properly maintained)
- Tax simplicity — same Schedule C filing as a sole proprietor
- Credibility — "LLC" after your business name can improve perception with clients
Cons
- Formation costs — state filing fees ($50–$500 depending on the state) plus potential annual franchise taxes
- Self-employment tax — still 15.3% on net profit, same as sole proprietor
- Maintenance required — must keep business and personal finances separate or risk "piercing the corporate veil"
Recommendations
Tip
Get an EIN (Employer Identification Number) from the IRS — it's free and takes 5 minutes online. Use the EIN for business banking, not your personal SSN. Also create a simple operating agreement even though you're the only member.
The LLC only protects you if you treat it like a separate entity. Commingling funds (using business accounts for personal expenses or vice versa) can eliminate the liability shield.