Single Member LLC

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In the United States, an LLC is a business structure that protects the owners from being personally liable for the company's debts or liabilities. Limited liability companies offer different aspects of both a corporation, a partnership, or sole proprietorship. LLCs are able to help you keep your business as a completely different entity. This provides you legal protection, a professional appearance, and various tax benefits as well.

What is a Single Member LLC?


Similar to a limited liability company, a single member LLC operates exactly the same. The only difference is that a single member limited liability company has only one member. Under IRS rules, a single member LLC will be treated as a disregarded entity for Federal income tax purposes unless it elects to be treated as a corporation.

SMLLC Benefits


Potential Tax Savings

As compared to a sole-proprietorship, single member LLCs are given the opportunity to choose how they wish to be taxed. This means that the potential tax savings are huge. If an SMLLC chooses to be taxed as an s-corporation there can be major tax benefits. Rather than pay their own personal tax rate, which might be higher, the single member LLC will only need to pay the corporate tax rate of 21%.

Limited Liability Protections

One of the most popular reasons for forming a single member LLC is to avoid personal liability for business debts. By forming an LLC as a single member, you will be afforded protection for all personal assets such as your house, bank accounts, or other assets.

Privacy

If you choose to form your single member LLC by using a registered agent in New Mexico, then you can keep your LLC separate from your name. This allows you complete anonymity that wouldn’t be afforded with a sole proprietorship.

More Professional

Having a business name with LLC allows you to maintain a professional appearance. This will allow you to obtain more clients, and appear as more than just a single person working on their business (even if that is what you are).

How to Form a Single Member LLC


Forming a single member LLC is exactly the same as any other LLC. The only difference between the two is that there is only one owner. Some states may require the articles of incorporation to mention this, but in New Mexico, an operating agreement is not required.

Forming a single member LLC is essentially the same as forming a Multi-Member LLC. It involves creating a separate business entity, legitimizing your business, and then paying taxes appropriately.

How is a Single Member LLC Taxed?


By default, a single member LLC is taxed as a disregarded entity. If you choose to, you can be taxed as either a standard corporation or S-Corp. This can be done through an additional filing with the IRS. The only election a single member LLC cannot choose is a partnership. This is because a partnership requires more than one member.

What Taxes do Single Member LLCs Have to Pay?

  • Federal income tax: All of the profits from a single member LLC will be passed onto you (the owner). This means that you will be taxed at your personal income tax rate based on the tax bracket you fit into.
  • State income tax: In New Mexico, the state income tax ranges from 1.7% to a maximum of 4.9%.
  • Self-employment tax: Because you are self-employed as a single member LLC you will be required to pay self-employment taxes to cover Medicare and social security payments. The current self-employment tax rate in New Mexico is 15.3 percent.

Employer Identification Numbers


Similar to a social security number for your personal use, an EIN is a unique nine-digit number that identifies your business for tax purposes. Although most new single member LLCs are classified as disregarded entities, they will still need to obtain an EIN. You can do this by filing Form SS-4, Application for Employer Identification Number.

An EIN is used for business-related items only and is necessary to open a business bank account, as well as apply for business licenses and file your tax returns. Without an EIN, it can be difficult to obtain funding or properly act as a business.

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