Single-Member LLV vs. Partnership...Should I Give Him 2%...

vesonexdean · 09-02-2009, 10:43 PM

After reading this article on this website it's made me question whether or not it's a good idea to become a single-member llc.

Here's the article:

Single Member LLCs -- The Skinny on Single Member LLC - MyLLC.com, Inc.

She mentions giving a family member or friend a piece of your company just to register as an official 'partnership LLC'

The only thing holding me back from actually doing this is the fact that I'm building an internet based consulting/educational company. I feel like there isn't much I could be sued for but I could REALLY be wrong in that assumption.

Would it be worth giving a piece of my company to one of my parents to become a partnership LLC? I know the world is sue happy so I'm a little afraid that the LLC won't protect me as a single member LLC since I'll be considered a sole proprietor in the IRS.

I'm just confused, do you guys know which option would be better?

Thanks for your help.

Vesone Dean

BusinessAdviser · 09-03-2009, 01:54 AM

Single member, multi member, you're an LLC. What does your state law say with regard to that? Why would there be a single member LLC is if didnt' offer the...LLC - limited liability protection.

vesonexdean · 09-03-2009, 07:32 AM

That's exactly what I thought...why offer a single member if it doesn't truly give you the benefits of an LLC. As far as Indiana goes, they treat single member LLC's like they would a sole proprietorship when it comes to taxes.Is that what she meant in that article?

BusinessAdviser · 09-03-2009, 10:29 PM

Likely yes. For TAXATION purposes. The gains and losses pass through to the members personally. As for the protection, doesn't matter.

GlobalWealth · 09-06-2009, 12:59 PM

The asset protection benefits vary greatly depending on the state of origination of the LLC. There are many methods to protect yourself here. There is nothing inherently bad about a single member LLC, but you should get a separate tax id# as opposed to having the LLC as a disregarded entity. This separates the business from the person and gives a bit of distance and protection. The state of filing for the LLC and the operating agreement are the critical components here. The $500 LLC you can buy on the internet offers you little or no legal protection in a litigation event.

financeblogger123 · 09-06-2009, 01:23 PM

have you thought about filing for an s-corp instead? all of the advice that i have received in the past few years was to stay away from a llc and go for the s-corp. from what i understand it hits all of the same benefits as an llc with an less gaps against and more loop holes in favour...however, i myself am still trying to answer this same question, so hopefully some other individuals can help us out.

GlobalWealth · 09-06-2009, 03:36 PM

Quote:

Originally Posted by financeblogger123

have you thought about filing for an s-corp instead? all of the advice that i have received in the past few years was to stay away from a llc and go for the s-corp. from what i understand it hits all of the same benefits as an llc with an less gaps against and more loop holes in favour...however, i myself am still trying to answer this same question, so hopefully some other individuals can help us out.

the simple answer is the s-corp is better for tax reasons, but terrible for asset protection. the LLC is better for asset protection, but not so good for tax, unless you elect to be taxed as an s-corp. another option is to form an s-corp as the operating company and an LLC to own the shares in the s-corp. then you get the best of both worlds.