A hybrid of partnerships and corporations, an LLC provides limited liability for all of its “members.” This is true even as management of the company may remain the same as a general or limited partnership. Its structure is flexible, allowing for a wide variety of situations, and formalities minimal, requiring little else than a filing of Articles of Organization with the State. Governed by contract between the members, the LLC is now used as the primary vehicle for asset protection and estate planning, replacing the limited partnership.
A Single Owner Limited Liability Company:
Limited Liability Companies (LLC) allow the owners to protect their personal assets from business liabilities while avoiding the double taxation of a corporation. State law originally limited the use of an LLC to the traditional partnership context where there is more than one owner. However, the Utah State Legislature eliminated the two person minimum requirement; as of May 5, 1997, an LLC may be formed in Utah with only one member.
In certain situations, using a one-member LLC is more advantageous than an S Corporation, Sole Proprietorship, or other business form. Included in its main advantages is the limiting of liability of the member of the business while still providing “flow through” tax treatment. This means profits of the company at the business level are subject to tax only at the individual level.
Because of the “Check-the-Box” regulations, the availability of a one-person LLC has even greater potential. Under the regulations, one-person entities can be ignored for tax purposes. Therefore, unlike a partnership that must file an informational return, a one-person LLC can be ignored and file no tax return at all. All of the income and deductions show on the individual owner’s schedule C as if the entity did not exist.
The one-person LLC is ideal for the sole proprietor who wants limited liability but not the complexity of running a corporation or filing corporate tax returns. For example, someone looking to invest in real estate and segregate his or her liability on different properties or protect against potential environmental liabilities would do well to opt for an LLC.
In short, given its simplicity and protection there is simply no longer any reason for an individual to conduct business as a sole proprietor.
Jeff B. Skoubye