The formation of a single-member Limited Liability Company (LLC) offers numerous benefits to entrepreneurs and small business owners. Delaware, known for its business-friendly environment and robust legal framework, is a popular choice for establishing an LLC. In this essay, we will explore the process and advantages of forming a single-member LLC in Delaware, shedding light on key considerations for prospective business owner
- A limited liability company (LLC) is a US business structure that offers the personal liability protection of a corporation with the pass-through taxation of a sole proprietorship or partnership.
- C Corporation is a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity. The taxing of profits from the business is at both corporate and personal levels, creating a double taxation situation.
Can I Form a Single Member LLC in Delaware?
The Answer: Yes.
One person (U.S. or foreign) can form a corporation or LLC in Delaware. These are known as “single-member LLCs,”
A single-member LLC can be used for everything from financing real estate transactions to solo consultant practices. However, it is still wise for single-member LLCs to have a written and executed Operating Agreement.
Understanding the Single-Member LLC
A single-member LLC is a business structure that provides limited liability protection to its owner while offering the flexibility and simplicity of a sole proprietorship. In Delaware, a single-member LLC is permitted, allowing entrepreneurs to operate their business as a separate legal entity distinct from their personal assets.
What is an Operating Agreement? Do I Need One?
An operating agreement is a key document used by LLCs because it outlines the business’ financial and functional decisions including rules, regulations, and provisions. The purpose of the document is to govern the internal operations of the business in a way that suits the specific needs of the business owners.
Technically every Delaware LLC must have an operating agreement, while it is possible to make it verbal or oral, a written operating agreement will often be requested by those with whom you do business to show ownership and control.
Can I Form a Single-Member Corporation in Delaware?
In the U.S., corporations are created by statute and every state statute that regulate their formation and operation. In Delaware, you are allowed to have one-person corporations.
More on Single-Member LLC
All corporations have three tiers of participants: the shareholders, who elect members to the board of directors; the board, which in turn appoints officers to manage the company on a day-to-day basis; and at least three corporate officers: president or chief executive officer, treasurer or chief financial officer, and secretary.
This structure applies equally to a single shareholder corporation. It is just a matter of having the proper documents and paperwork.
Supplementary Information for Single-Member LLC
Similarly, regarding a corporation, one person can also hold all of the offices in the corporation and be the only stockholder.
Even a one-person corporation should follow formalities and have bylaws and a stock certificate. One reason for this is because disregarding corporate formalities is one way to pierce the corporate veil and hold the stockholder personally liable for the corporation’s liabilities.
Additionally, the corporation must hold an annual meeting of the sole stockholder and director and keep this record in a minute book.