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What is the Difference Between an LLC and a Single Member LLC?

Attorney Thomas B. Burton answers the following question: What is the Difference Between an LLC and a Single Member LLC?

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Hello I'm Attorney Thomas Burton. I'm an Estate Planning and Business Law Attorney here in Wisconsin and today's question is the following:

"What is the difference between an LLC and a single member LLC?"

This is a good question and I would say, here we're talking about terminology, a LLC is a limited liability company and an LLC can be either a single member LLC meaning entirely owned by one individual. We call the people, the owners of an LLC, the members, member is the term used.

In the business and tax literature, you may see IRS, other entities referred to a single member LLC. This means an LLC, a limited liability company, owned completely by one individual.

Now there can be LLC's with more than one member and that's what we call a multi-member LLC but in writing and such, you may not see it called a multi-member LLC. It's just called an LLC and you don't know how many members there are because that information is generally private.

You can have a 10 member LLC, 20 member LLC, 30 member LLC, there can be a lot of members of the LLC and the name will be the same whether it says Smith Painting LLC or Wild Ridge Cabins LLC. You don't know how many members there are. The member status, when we talk about single member versus multi-member, it becomes important for tax filing. Because if you're a single member LLC, you can generally file your taxes as a disregarded entity similar to a sole proprietorship and you can even file them on a schedule to your personal tax return.

If you're a multi-member LLC, then the multi-member LLC itself is going to need to file Form 1065 which is a partnership return, that reports the income and expenses of the business and then issues the K1 to the members. That's if you opt for, to be a disregarded entity flow through taxation for a multi-member. Multi-member or a single member can also opt to be taxed as a corporation, pay the tax at the entity level but then members are taxed again when they take a dividend.

But the difference between just LLC and single member LLC, they can mean the same thing, what I think the question might be getting at is whether it's a multi-member LLC or a single member LLC and in that case, it could change your tax filing options and status.

If you're interested in learning more about multi-member versus single member LLC tactics, I have an entire video, a longer video on this topic and I recommend you check that out on the channel but in terms of just the term LLC, it can be used by one individual operating as a single member LLC or by a group of individuals operating a business as a limited liability company.

Great question, thank you for asking, thank you for tuning in and we'll see you next time.

© 2023 Burton Law LLC. All Rights Reserved. Transcript and captions provided for ease of access for the hearing impaired. For questions about this topic, or to suggest a topic for a future blog post, please contact the office.


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