One Member LLCs

To form a limited liability company (LLC) under Utah law and for a Utah LLC to exist, there must be at least one member (owner) at all times. An LLC with one member is just as much a fully-recognized entity as an LLC with multiple members.

Since there is no restriction on the type of person who can be an LLC member, the member in a 1-member LLC can be an individual, a partnership, a corporation, a trust, an estate, another LLC, or any other type of entity. That suggests many uses for 1-member LLCs. Here are some of those possible uses:

  • to protect one parcel of property from the risks of other parcels
  • to hold a risk-generating activity (such as an airplane or houseboat)
  • to give form to a sole proprietorship
  • to own a solo professional practice
  • to serve as a subsidiary of a corporation or of another LLC
  • to hold title to property tainted with toxic waste
  • to own a new business during its start-up phase
  • to hold title to recreational vehicles

Although 1-member LLCs are separate, viable entities under state law, they are usually “disregarded” for income tax purposes, meaning they are usually treated as being invisible or transparent for tax purposes.  We say “usually” because it is possible for a 1-member LLC to elect to be taxed as a corporation by filing a special election form with the IRS. (There are few such elections filed.)

If a business person owns 100% of the LLC–is the only member–the LLC itself will not have to pay any federal or state income taxes or file income tax returns.  Instead, all income, gains and deductions will be reported directly on the member’s personal income tax returns.  Due to such 100% ownership, the LLC in such situations is a “disregarded entity” for tax purposes.  This is another significant advantage for utilizing a 1-member LLC to limit potential liability while, at the same time, keeping tax return preparation and reporting very simple.

A 1-member LLC can be designed as a member-managed LLC or as a manager-managed LLC.  Where it is member-managed, that one member is the only person to “run the show” and the name and address of that one member must be disclosed in the Articles of Organization and in the annual reports filed with the Division of Corporations.  Thus, there is no anonymity with a 1-member LLC that is member-managed.

In contrast, in a 1-member LLC that is manager-managed, where the manager is a person other than the member, the identity of the member is not disclosed on any filings with the Division of Corporations.  This arrangement preserves anonymity for the member.