Single Member LLC Operating Agreement Template PDF

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Single Member LLC Operating Agreement Form PDF Free Download

Single Member LLC Operating Agreement

What is a Single-member LLC?

A single-member LLC (SMLLC), also known as a sole-member LLC, is a limited liability company (LLC) with one owner (member).

As a separate entity, a single-member LLC protects its owner’s assets from the company’s debts and obligations.

A single-member LLC benefits from similar LLC tax classifications as a multi-member LLC.

According to the Internal Revenue Service (IRS), a single-member limited liability company is classified as a disregarded entity, meaning it doesn’t file a tax return on behalf of the business.

The business’s profits and losses are recorded on the owner’s personal federal tax return.

The earnings are subject to self-employment taxes using Schedule C in the same manner as a sole proprietorship.

Alternatively, a single-member LLC can elect to be taxed as a corporation by filing an Entity Classification Election (Form 8832).

It’s important to note that all states charge an annual fee for LLCs. 

For example, any LLC doing business or organized in California must pay $800 annually.

Should you create a single-member LLC operating agreement?

If you’re forming an LLC by yourself, you may think you don’t need an operating agreement.

However, it’s highly recommended that you create one for the following reasons:

Prove separation: An operating agreement acts as evidence to courts that your single-member LLC is a separate entity removed from your assets.

This is important in the event you or your LLC is sued based on your LLC business and the lawsuit is attempting to reach your personal assets.

Define dissolution/succession: This gives you an opportunity to outline how assets and liabilities should be distributed in the event the LLC must dissolve (although liabilities are always paid first) and appoint someone to manage the LLC in the event of your death or incapacitation.

Increase credibility: Investors will evaluate your single-member LLC operating agreement before doing business with your company. Banks will often require one to open a bank account.

Determine your own rules: Without an operating agreement, your single-member LLC is subject to the rules governing LLCs in the state where its articles of organization are filed.

Single-member LLC vs sole proprietorship

A sole proprietorship and single-member LLC are both businesses owned by one person.

However, unlike a limited liability company, a sole proprietorship is not legally separated from its owner.

This means that the owner is still liable for the business’s debts, losses, and legal obligations.

Single-member LLC

Can hire employees

Need to file articles of incorporation

Acts as a separate entity

Can create bank accounts

Sole proprietorship

Can’t hire employees without an EIN

Not a separate entity

Needs to use a DBA (Doing Business As) or personal name to create bank accounts

Can’t elect corporate tax status

How to Write

In general, the content should describe the purpose, operations, and finances of your business.

If you’re serious about growing your single-member LLC, you should create a comprehensive operating agreement that includes:

Step 1 – Company Details

The company name and address of your principal place of business as well as a description of the purpose of the business.

Step 2 – Registered agent & office

Almost every state requires an LLC to appoint a registered agent and list a registered office in the state the company is registered.

The registered agent must be available to accept government, legal, and tax notifications on behalf of the business.

Your operating agreement should list the registered agent’s name and contact details as well as the address of the registered office.

Step 3 – Ownership

As the sole owner, simply declare that you own 100% of the limited liability company and voting rights.

Step 4 – Management

Specify if your single-member LLC is member-managed or manager-managed.

If you opt for a member-managed LLC, your operating agreement should state that you’re the sole manager.

If you choose a manager-managed structure, detail how many managers you intend to appoint, as well as their responsibilities and compensation.

Step 5 – Adding new members

Include the option to add additional members to your LLC at a future date.

Transitioning from a single-member LLC to a multi-member LLC will require significant alterations to your operating agreement.

Step 6 – Capital contributions

Outline capital contributions, including cash, property, and other assets you’re making to the business as the sole owner.

Step 7 – Payment

Describe how you will be compensated by the LLC, for example by receiving a regular salary or periodic lump sum payments.

Including this in your single-member LLC operating agreement demonstrates to tax agencies that the business is a separate entity from you.

Step 8 – Dissolution & succession

Provide a plan for your business management and assets if you die or become incapacitated.

If you want to name a successor, use this section to do so.

Step 9 – Governing laws

Declare the state whose laws will govern this agreement and company.

Step 10 – Signature

Sign the SMLLC operating agreement as the sole member.

Since you’re the only one signing the document, it’s recommended that you sign it in the presence of a notary public.

Language English
No. of Pages7
PDF Size2 MB

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Single Member LLC Operating Agreement Form PDF Free Download

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