Can I Form a Single Member LLC in Georgia?
Most small businesses in Georgia start out as solo operations. Indeed, for many self-employed individuals, their business will never expand beyond themselves. If that describes your situation, you may want to consider registering your business as a Georgia single-member limited liability company (SMLLC).
What Is a SMLLC?
Similar to a corporation, a limited liability company (LLC) is a Georgia business entity that enjoys separate legal existence from its individual owners. In an LLC, these owners are called “members.” Forming a Georgia LLC requires filing Articles of Organization with the Secretary of State’s office and paying a fee of around $100.
A Georgia LLC must have at least one member. And as the name implies, a single-member limited liability company only has one member. The member can be another business entity, such as another corporation or LLC, but oftentimes it is a person.
Indeed, SMLLCs are commonly used by self-employed individuals who work primarily as independent contractors. The main benefit to working through a SMLLC is liability protection. Basically, you can use the SMLLC to separate your personal and business assets. Any business-related creditors can only go after the assets in your SMLLC.
SMLLCs and Taxes
Federal and state tax authorities “disregard” the legal status of a SMLLC for income tax purposes. In other words, any income (or losses) incurred by your SMLLC are simply treated as part of your personal income tax liability. The IRS classifies a SMLLC as a “sole proprietorship,” i.e., a self-employed person, unless the sole member elects to be treated as a corporation. (This is uncommon but advisable in some situations.)
So if you organize your business as a SMLLC, you would simply file a Schedule C with your regular Form 1040 reporting your business income and expenses. This also means that, unless your SMLLC plans to employ persons other than yourself, you do not need to obtain a separate IRS employer identification number for your SMLLC.
SMLLCs and Operating Agreements
In multi-member LLCs, it is common practice for the members to sign an operating agreement. This is separate from the Articles of Organization, which only broadly defines the LLC’s existence. The operating agreement is essentially a contract between the members, similar to a partnership agreement, outlining each member’s roles, responsibilities, and ownership.
SMLLCs can also have operating agreements. At first glance this might sound odd: How can a single member sign a contract with themselves? But as a matter of contract law, you are actually signing a contract between yourself (the person) and your LLC (a separate legal entity). And having such an operating agreement in place can help prove you are keeping your business and personal assets separate for purposes of liability protection. It can also make it easier to bring in additional LLC members in the future if that is something you are considering.
Contact an Atlanta Business Entity Formation Lawyer Today
Whether you are a solo entrepreneur or part of a group looking to start their own business, it is important to start things off on the strongest possible legal footing. Our Atlanta business entity formation attorney can advise you on the right structure for your situation. Contact The Forsythe Law Firm, LLC, today at 404-476-2717 to submit your inquiry.
