South Carolina allows you to organize your business as a limited liability company even if you are its sole member. Forming an LLC means that you are separate from your company for legal purposes. Let’s take a look at the types of protection that you might be entitled to and how your company may be taxed if it operates as an LLC with a single member.
What type of protection does an LLC provide?
The LLC structure is generally considered to be a cross between a sole proprietorship and a corporation. This is because you get the same type of liability protection that you would get from forming a corporation without spending as much time and money on paperwork. Therefore, if a judgment is rendered against your company, only company assets can be used to satisfy it. An exception may be made in the event that you guaranteed a loan that the company defaulted on.
How are LLCs treated for tax purposes?
If your LLC has a single member, it will be classified as a disregarded entity by default. In other words, you’ll follow the same tax rules that you would if you were a sole proprietor. You can elect to be taxed as a corporation by filing Form 8832 with the IRS. This can be done on your own or by someone who has experience with the business formation process.
How your business is structured is perhaps the most important decision that you’ll make as the leader of your organization. When making this choice, you’ll need to consider many variables such as how much liability protection you’ll need or whether you want to oversee a pass-through entity as opposed to a corporate entity.