Single-member LLC: what it is and how it’s taxed

What a single-member LLC is

A limited liability company is a business structure set up under your state’s law. You create one by filing articles of organization with the state: a simple document that describes the basics of the LLC, such as its name, address and registered agent. A single-member LLC has one owner, called its member.

If you do business without registering any structure, you are a sole proprietor automatically. A sole proprietorship is not a separate entity: the business’s assets and debts are yours.

What the LLC protects

The main reason owners form an LLC is liability. In the U.S. Small Business Administration’s words, LLCs “protect you from personal liability in most instances.” Your personal assets, such as your vehicle, house and savings accounts, are not at risk if the LLC faces bankruptcy or a lawsuit. Note the words “in most instances”: the protection comes from state law and has limits.

As a sole proprietor, you can be held personally liable for the debts and obligations of the business.

How the IRS taxes a single-member LLC

The IRS has no tax category called LLC. By default it treats a one-owner LLC as part of its owner for income tax, so the profit goes on Schedule C of your personal return, the same as a sole proprietor’s. You pay self-employment tax on that profit: 15.3% on 92.35% of it.

For employment taxes, the IRS treats the LLC as separate from you. That matters once the business has an employee, and after an S election you are one.

An LLC can change its federal tax treatment. It can elect to be taxed as a C corporation on Form 8832, or elect S status on Form 2553. The election changes the tax, not the LLC your state set up. LLC vs. S corp explains the S election, and S corp vs. C corp compares the two corporate treatments.

Single-member LLC vs. sole proprietorship

	Sole proprietorship	Single-member LLC
How it starts	Automatically, when you do business without registering a structure	You file articles of organization with your state
Personal liability for business debts	Yes	Protected in most instances
Federal income tax (default)	Schedule C on your return	Schedule C on your return
Self-employment tax	Yes	Yes
Can elect S or C corporation tax	No: it is not an entity	Yes: Form 2553 or Form 8832
State filing	None to create it	Articles of organization, with a state fee; many states also charge an annual report fee or tax

State fees vary widely. California, for example, charges a single-member LLC an $800 annual LLC tax plus a fee based on total California income (California LLC fee). LLC lookup links every state’s official business search.

The operating agreement

An operating agreement describes how the LLC makes its financial and business decisions and sets out the member’s duties and powers. Even with one owner and even where a state does not require one, the SBA calls it “widely recommended” to protect yourself and your business. The agreement is a state-law document; this site does not provide one.

Where the S election fits

Forming an LLC does not change your federal tax by itself. Your profit still carries self-employment tax. The S election is the step that can change that, by splitting your pay into a salary and distributions. What is an S corp? explains how, and the calculator shows what it would do in your state.

Sources

• U.S. Small Business Administration, Choose a business structure
• IRS, Limited Liability Company (LLC) (page last reviewed 10-Oct-2026)
• IRS, S corporations (page last reviewed 11-Jun-2026)
• IRS, Self-employment tax (Social Security and Medicare taxes) page
• Schedule SE (Form 1040) 2025, line 4a
• Instructions for Form 2553 (Rev. December 2020), Purpose of Form
• FTB, S corporations

Every figure was read on an official page and checked a second time. Checked October 24, 2026. How we check facts.

An explanation of public rules, not tax advice.