Virginia Single-Member LLC Basics

A single-member LLC is an easy, cheap, and tax-friendly method of legitimizing your business while protecting your personal assets.
Limited liability companies can help you structure your operation under a single organizational structure.

A Virginia limited liability company (LLC) is a business entity that generally resembles both a sole proprietorship/partnership and a corporation.

An LLC can have one or multiple owners, or “members,” who share an interest in the business.

However, not all LLCs require multiple members.

Notably, single-member LLCs are a great way to receive LLC protections without dividing your business between multiple people.

Virginia Single-Member LLC Basics

group of young business people are working together in modern office. startup concept for registering a new llc in virginia.
LLCs are pass-through tax entities that help you limit your liability in the event of a lawsuit.

Forming a single-member LLC provides a single business owner with the benefits of owning a formal business entity.

This means that the single-member business is legally regarded as an LLC, a separate entity, in terms of taxation, liability, and management.

A sole proprietorship differs from a single-member LLC in that it lacks the liability protection of an LLC entity.

When operating as a sole proprietorship, your personal property and assets may be on the line if your business becomes liable.

However, when functioning as a single-member LLC, business liabilities aren’t personal liabilities.

In other words, if your business is sued, property and assets that you own personally should be protected.

The single-member LLC stands as a separate business entity, whereas a sole proprietorship combines business and ownership entities.

Forming a Single-Member Limited Liability Company

Forming a single-member LLC is relatively easy, and can be accomplished by simply submitting the right paperwork to the Virginia SCC.

The process of forming a single-member LLC mirrors the process for forming a multi-member LLC, just with a lot less paperwork.

There are registrations, regulations, and additional requirements that need to be met.

Registering Your Single-Member Limited Liability Company (SMLLC)

When registering a single-member LLC, you must choose your “fictitious name,” or the name you and your business will operate under.

You must also choose and file your registered agent, or the person who will be accepting legal documents on behalf of your establishment.

Your registered agent receives these documents from your registered business location, which must be located in the same jurisdiction as your business’ registration.

These documents are typically filed with the Secretary of State.

However, it is advised that you check with your individual state’s filing regulations in order to ensure you are completing all of the proper paperwork.

Your SMLLC will also require the payment of a filing fee.

Upon filing, you will be billed for submitting your paperwork, as well as for requesting any certified copies that you may require.

If you are in need of certified copies of your filing, be sure to request those copies upon filing. You are billed for those copies alongside your filing fee.

Single-Member Limited Liability Company (SMLLC) Articles of Organization

When forming your SMLLC, you need to formally establish the foundation.

This includes the name and local address of the business, the name of the qualified registered agent, and the business function of your SMLLC.

You must state the purpose of your business, including the practices offered, in your articles of organization.

Additionally, an SMLLC can be member-managed or manager-managed. 

If you are considering outside management of your SMLLC, you will also need to include the name(s) of your appointed manager(s) This document is filed at the time you pay your filing fee.

Single-Member Limited Liability Company (SMLLC) Operating Agreement

Your SMLLC operating agreement functions to establish how your business is actually run, rather than establishing the founding and filing details.

Your operating agreement documents other details, such as how the business is managed, whether or not additional membership is considered, and the procedure for closing or selling the business.

While this is a document that is not required for filing with the state in order to operate, it is recommended upon establishment.

As the sole member, you do not need to establish a partnership agreement unless you transition the business to a multi-member limited liability company (LLC).

Other Considerations

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Single-member LLCs provide numerous tax benefits to their members when compared to sole proprietorships and corporations.

Single-Member Limited Liability Company (SMLLC) Taxation

An SMLLC can be taxed as a corporation or as a sole proprietorship.

If the business does not have additional employees, it is taxed as a sole proprietorship.

This means that you do not file for your business to be treated as a corporation because it is owned and operated by you.

According to the Internal Revenue Service (IRS), your SMLLC is a “disregarded entity” if it is considered a sole proprietorship.

As a result, the business is taxed as a sole proprietorship without losing the benefits of a corporation.

The taxes of the SMLLC consist of income, rather than other business taxes. Therefore, these business taxes are filed alongside your personal income taxes.

Single-Member Limited Liability Company (SMLLC) Protections

As with a limited liability company (LLC), you are offered limited personal liability.

However, the law becomes muddled when it comes to addressing your liability as a sole member of the LLC.

Your personal assets, such as property and income, cannot be pursued by creditors of the business.

However, as the sole member of the business, you may be considered liable for some business practices.

Most LLCs seek to protect against member-to-member liability so that the actions of one member are not a liability for the others.

Sole membership of the business eliminates this liability, and therefore changes the limitations on personal liability.

These changes vary from state to state, and may carry local regulations.

In Virginia, personal assets are well protected from business liabilities.

However, if your business operates outside of the state, you are subject to fulfill or meet that state’s business laws, regulations, and restrictions.

Consulting with an attorney in the jurisdiction of your business will clarify your business and personal liabilities, if any.

Piercing the Corporate Veil and Limiting Your Liability

The phrase “piercing the corporate veil” refers to the court’s ability to assimilate an owner with their business.

In court, it can be argued that you are not separate from your business, and, therefore, it is possible to be held personally liable for your business’s debts.

Often, inaccuracies in the operating agreement or the articles of organization can provide this loophole for the courts.

These agreements should be drafted in order to reflect your single-member interest. Forming a generalized agreement for an LLC is not adequate coverage for SMLLC liability.

Oversights in formal paperwork and inaccuracies in drafting create weaknesses in the business. Therefore, preventing oversights is crucial to protecting your personal assets.

Conclusion

Establishing a limited liability company is similar, but not equivalent, to establishing a single-member limited liability company.

There are regulations you must meet, filings you must complete, and details that you must consider before forming your business.

Schedule a consultation with a business law attorney in order to assess and successfully form your single-member limited liability company.

Further Reading

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