Limited liability companies, known as LLCs, are a business structure used to separate liability of the business from the business owner. They are formed in order to prevent business owners from being personally liable for any of the company’s debts or other liabilities. LLCs are hybrid entities that combine different characteristics of both corporations, along with partnership or sole proprietorships.
What is a Single Member LLC?
Wyoming Single-member LLCs are known as SMLLCs. The only difference between an SMLLC and an LLC is that LLCs are composed of multiple members, while SMLLCs are composed of only one member. Unless a single member LLC elects to be treated as a corporation, it will be disregarded for federal income tax purposes.
How to Form a Single Member LLC in Wyoming
Forming a single-member LLC in Wyoming is no different than forming a standard limited liability company. The only difference is that there is only one owner who is referred to as an owner, while LLCs refer to owners as members. Steps to form a single member LLC include:
- Go to your state's department of state business division.
- Filing the Articles of Organization (also known as a Certificate of Organization in certain states).
- Pay a filing fee.
- Prepare an operating statement to decide how you plan to run your business.
Benefits of a Single Member LLC in Wyoming
There are several benefits of forming a Single Member LLC in Wyoming
Separate Business Entity
A Wyoming single member LLC is a separate entity from the owner. This means that although there is only one person involved, it will not be attached to the owner for any tax purposes, as well as liability purposes.
Legitimate Business
The best part of a single member LLC is that it is recognized as a legitimate business. It is good to note that there will be a required "LLC" in the business name. When you work alone, customers may question your business legitimateness. A single member LLC can help validate your company in the eyes of the customer.
Formed Within a State
A single member LLC must be formed in the state that it is going to operate. For example, if you plan on operating a business in Wyoming on your own, a single member LLC must be formed in Wyoming. Although this can be done in a sole proprietorship, it is a separate process requiring more steps.
How is a Single Member LLC Taxed?
Similar to standard Wyoming LLCs or sole proprietorships, a single-member LLC will be subject to several different kinds of federal and state taxes as a business entity. Although these are the same that are required from other businesses, the method of payment is unique to SMLLCs.
What Taxes do Single Member LLCs Have to Pay?
- Federal income tax: Since an LLC is not a taxing entity, the IRS has stated that single-member LLCs are taxed as sole proprietors. This means that as a single-member LLC, you will need to report your business income on a “Schedule C” form. You will then need to combine your net income with any other income on your personal tax return.
- Self-employment tax: Similar to sole proprietors, single-member LLC owners are considered self-employed. This means that you will be required to pay self-employment taxes. This includes both Social Security and Medicare taxes every year, and this will be based on your net income from the business.
Employer Identification Numbers
An Employer Identification Number is also known as a Federal Employer Identification Number, or Federal Tax Identification Number. The EIN is similar to a Social Security number, for your business. Essentially, your nine-digit EIN number allows the Internal Revenue Service to identify your business when tax reporting.
Single member LLCs do not need an EIN as long as you do not have any employees. Despite this, it is recommended to open a bank account and hire employees at a later date in order to maintain a corporate veil. If you do have employees, then you will be required to have an EIN.
Is an EIN for a Single Member LLC Worth it?
If you form your business without an EIN or employees, you might regret this down the road. This is why it is recommended to get an EIN for your single member LLC. Another benefit is that you can use your EIN rather than your social security number. This can reduce the chances of identity theft.
If you are looking for a method to keep your personal finances separate, boost your business’s credit, and possibly apply for a business loan, having an EIN is definitely worth it. Contact us at Wyoming Trust & LLC Attorney to learn more about obtaining an EIN for a single member LLC.