What a single-member LLC is, how it compares to a sole proprietorship, how it is taxed, whether it protects your assets, why the operating agreement matters most for a solo owner, when to add a second member, and how banks and non-resident owners handle it.
The short answer: A single-member LLC has one owner and is a disregarded entity by default - taxed on your Schedule C while shielding your personal assets under state law. Its weak point is single-member charging-order protection, strongest in Wyoming.
Pick your situation to jump to the comparison, protection, or tax section.
A single-member LLC has exactly one owner. The IRS disregards it by default under Treasury Reg § 301.7701-3, taxing its income on your Schedule C, while state law still treats it as a separate entity that shields your personal assets.
| Aspect | State law | Federal tax |
|---|---|---|
| Legal status | Separate entity | Disregarded (the owner) |
| Owns property, signs contracts | Yes, in the LLC's name | Owner treated as doing so |
| Liability shield | Yes | n/a |
| Return | State annual report | Schedule C (Form 1040) |
Source: Treasury Regulation § 301.7701-3 (check-the-box rules), verified July 2026.
They are taxed identically on Schedule C, but a single-member LLC adds a state-law liability shield, business banking, the S-corp option, and anonymity in four states. A sole proprietorship gives none of that for the same tax.
| Feature | Sole proprietorship | Single-member LLC |
|---|---|---|
| Liability shield | No | Yes |
| Default tax | Schedule C | Schedule C (same) |
| Business bank account | Hard (no EIN / docs) | Standard (EIN) |
| S-corp election | Awkward | Standard path |
| Anonymity | No | Yes (WY, NM, DE, NV) |
| Charging-order protection | None | Yes (strong in Wyoming) |
| Formation cost | $0 | $347-$407 all-in |
Source: state LLC acts and IRS Publication 3402, verified July 2026.
A single-member LLC is a disregarded entity: you report its profit on Schedule C and pay 15.3% self-employment tax. Above about $40,000 profit, an S-corp election cuts that tax. Non-resident owners file Form 5472 instead.
| Owner type | Classification | Federal filing | Key tax |
|---|---|---|---|
| US owner (default) | Disregarded entity | Schedule C + Schedule SE | 15.3% self-employment tax |
| US owner, S-corp elected | S-corporation | Form 1120-S + payroll | FICA on salary only |
| Non-resident owner | Disregarded, reportable | Pro-forma 1120 + Form 5472 | No SE tax; $25,000 penalty risk |
Source: IRC § 6038A and IRS check-the-box rules, verified July 2026.
The full tax mechanics - the self-employment-tax math, the S-corp breakeven, reasonable salary, and the Form 5472 line-by-line - live on the LLC tax pillar. For a single member the essentials are: Schedule C by default; elect S-corp on Form 2553 once profit clears the breakeven; and, if you are a non-resident, file Form 5472 with a pro-forma 1120 every year even at zero income, or face a $25,000 penalty.
Yes, but single-member protection is the weak spot. Wyoming makes the charging order the exclusive creditor remedy even for one owner (W.S. § 17-29-503(a)); Florida and others let a creditor foreclose the whole LLC.
| State | Single-member exclusivity? | Statute / case | Foreclosure allowed? |
|---|---|---|---|
| Wyoming | Yes | W.S. § 17-29-503(a) | No |
| Nevada | Yes | NRS 86.401 | No |
| Delaware | Partial | 6 Del. C. § 18-703 | Historically flexible |
| New Mexico | Weaker | Standard LLC act | Possible |
| Florida / California | No | Olmstead v. FTC (2010) | Yes |
Source: state LLC statutes and Olmstead v. FTC, 44 So. 3d 76 (Fla. 2010), verified July 2026.
Yes - a solo owner needs one most. Courts pierce single-member LLCs that lack a signed operating agreement, treating them as alter egos. Banks also require it to open an account, whatever your state's law says.
| Alter-ego factor | Court weight | How to avoid it |
|---|---|---|
| Commingled funds | High | Separate business bank account from day one |
| No operating agreement | High | Sign a specific, real one |
| Undercapitalization | Medium | Contribute and document capital |
| Inconsistent signing | Medium | Always sign "as Manager, [LLC]" |
| No records or formalities | Medium | Keep distributions and books clean |
Source: Curci Investments v. Baldwin (Cal. Ct. App. 2017) and alter-ego case law, verified July 2026.
The mistakes that pierce a single-member LLC:
Add a second member when you want stronger charging-order protection outside Wyoming, a co-founder, or a spouse. A multi-member LLC files Form 1065 instead of Schedule C and gains protection most states reserve for multiple owners.
| Single-member | Multi-member | |
|---|---|---|
| Default tax | Disregarded (Schedule C) | Partnership (Form 1065) |
| Federal form | Schedule C | Form 1065 + K-1 |
| Charging-order strength | Strong only in WY / NV | Strong in most states |
| Annual filing burden | Lighter | Heavier (K-1s, capital accounts) |
| Operating agreement | Simple | Complex (allocations, buy-sell) |
Source: IRC Subchapter K and state charging-order statutes, verified July 2026.
Adding a member is not always worth the extra complexity. If you form in Wyoming or Nevada, a single member already gets exclusive charging-order protection, so a second member adds Form 1065 and K-1 work for little gain. Outside those states, a genuine second member (a co-founder, or a spouse in a common-law state) strengthens protection. In community-property states, a married couple can elect to keep single-member simplicity as a qualified joint venture under Rev. Proc. 2002-69.
Every US bank requires an EIN for a single-member LLC even though the IRS lets you use your SSN. Non-resident owners bank through Mercury, Relay, or Wise with a passport, and file Form 5472 each year.
| Touchpoint | Single-member LLC |
|---|---|
| EIN | Required by banks (SSN not accepted) |
| Beneficial owners to identify | One - you |
| Operating agreement | Required at account opening |
| Non-resident banking | Mercury, Relay, Wise (passport-based) |
| State anonymity at the bank | Not preserved - KYC identifies you |
Source: 31 CFR 1010.230 (Bank Secrecy Act Customer Identification Program), verified July 2026.
A single-member LLC is the faster path through bank onboarding - one beneficial owner, one control person, one classification. The bank still collects your full identity under the BSA and holds it confidentially, so state-record anonymity protects you from the public but not from the bank. Non-resident single-member owners also carry the annual Form 5472 obligation; the LLC stays a disregarded entity with no US income tax unless it earns US-effectively-connected income.
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