Understanding Single Member LLCs
What is a single-member LLC?
An LLC is a formally recognized business entity formed within a state and can have one or more owners (known as members). A single-member LLC has only one member.
One of the most straightforward benefits to an LLC is limited liability. An LLC is considered a separate entity from you, meaning if your LLC business goes bankrupt or is sued, your personal assets outside of the LLC are normally protected from creditors and lawsuits.
How do you form a single-member LLC?
Single-member LLCs have some necessary paperwork. The six things you must do are choose a name, select a registered agent, determine the style, file the articles of incorporation, apply for your EIN, and put an operating agreement into place.
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Choose a name
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Choose a registered agent
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Decide on member-managed or manager-managed
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File the articles of incorporation
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Apply for your EIN
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Get an operating agreement
How single member LLC's can help investors.
What do you need to know about state-to-state transfers of single-member LLC's?
If you are relocating or planning to move your Limited Liability Company (LLC) to another state, you have three options: domesticate your current LLC, form a new LLC in the state you are moving or transferring to, or foreign-qualify your LLC.
Should I domesticate my LLC to move to another state?
Domestication of an LLC means you are keeping your entity intact but are subjecting it to a new state or new set of laws to govern it. It is sometimes called a "conversion."
This is considered the most straightforward process; however, you may run into the fact that not all states allow business entities to do this. Researching both the new state and your current state entity requirements will provide you with more details and insight.
Why Should I Domesticate My LLC?
Domesticating allows your existing LLC to become an active entity under the new state’s laws and allows it to maintain its entity history, bank accounts, and EIN. It also has the advantage of low costs and it is relatively easy to do so. Plus, you will only have one location to worry about, avoiding the extra hassle of maintaining state requirements and paperwork in multiple states.
How Do I Domesticate My LLC?
The Domestication process varies from state to state, but in most states you will need to obtain a “Certificate of Good Standing” from the original state where your entity was filed. You will then file the “Certificate of Good Standing” along with the Articles of Domestication (Articles of Conversion in other states) with the new state.
Once the newly filed articles have been approved, you can then file to dissolve the old LLC in your original home state. You will want to do your research how the state requires you to dissolve your old LLC so there are no deadline or timeline issues that catch you off guard.
Should I dissolve my LLC and create a new one?
Another option is to form a new LLC in the new state and dissolve the current LLC in your home state. This can be tricky if you have multiple members. You may consider consulting with an attorney or seek guidance from a professional if the entity has multiple members.
The existing LLC will no longer be an active entity and will not be required to meet any further state requirements once it has been dissolved.
How Do I Dissolve and Form a new LLC?
The best way to begin this process is to file the new LLC in your desired state. As with any other LLC, you will want to check your LLC name with the Secretary of State for availability. Once the state approves your LLC filing, you will need to obtain all new documents, such as a new Federal Employer Identification Number (EIN), Operating Agreement, and bank account.
At that point, you will want to revisit your operating agreement. An operating agreement will usually provide detailed information for members on how to dissolve the LLC. Once you have followed the procedures outlined in your operating agreement, notified creditors and tax authorities, closed business and banking accounts, and so on, you can file Articles of Dissolution with your home state.
What does it mean to register the existing LLC to “Do Business” in Another State
This is where an LLC is conducting business in a state other than the one where it was formed. This is considered a foreign LLC. This option would be beneficial for a company that plans on moving temporarily or would like to do business in multiple states.
How Do I Register as a Foreign LLC?
To apply for a foreign qualification status, you will need to obtain a “Certification of Good Standing” from the existing state and file it along with the foreign entity application in the new state. Each state has its own forms and processes for filing. These processes will be laid out on the Secretary of State’s website.
What is the Benefit of Having a Foreign Entity?
A major benefit of this is it gives you permission to operate your business in a different state legally. While you will be doing business in a different state, your LLC will remain a single entity. Another benefit to this is you will not be required to obtain a new EIN and/or Operating Agreement. It is still your business, the only thing that changes is the location of the business.
Choosing between a domestic versus foreign LLC is a complex choice that depends on your specific situation. Please contact us with any questions you might have.
Midland Forms Services related to Single Member LLCs
EIN