A common business structure for a new small business is a single-member limited liability company (“SMLLC”). While a single owner can now establish an LLC as a single member, that was not always the case. This business entity choice allows individuals starting a business to benefit from the legal protection for personal assets afforded by an LLC, whereas operating as a sole proprietor provides no separation between business liabilities and personal liabilities. However, many new solo business owners operate their businesses from their homes and may be concerned about their privacy when registering an LLC. Fortunately, there are several ways you can preserve your anonymity as a single-member LLC.

 

LLCs are the most flexible of all business entities. According to the Internal Revenue Service, “…a Limited Liability Company is an entity created by state statute. Depending on elections made by the LLC and the number of members, the IRS will treat an LLC either as a corporation, partnership, or as part of the owner’s tax return (a “disregarded entity”).” For tax purposes, the income of a single-member LLC is treated as personal income of the owner. While a single-member LLC sounds suspiciously similar to a sole proprietorship, a sole proprietorship is not a separate legal entity like an LLC.

 

To officially and legally form your SMLCC, your state will likely require you to submit your Articles of Organization and necessary fees to the Secretary of State’s office. Single-member LLCs require more paperwork to establish than a sole proprietorship, which is essentially a default, automatic business entity that is created once you begin offering goods or services in commerce.

To establish a single-owner LLC, a properly drafted and executed operating agreement is necessary and crucial to achieving all of the benefits of an LLC. Seeking the advice of an expert can prevent inadvertently undoing the great asset protection features afforded by an LLC. Unfortunately, most business owners are not aware of the importance of having a properly drafted operating agreement and are shocked to realize their protection is non-existent when they are faced with a lawsuit. Finding a business law attorney to assist you properly create, structure, and execute your single-owner LLC provides not only legal guidance, but also can assist in protecting your privacy as much as possible in the formation of the single-member LLC.

Your Articles of Organization and Operating Agreement will need to declare the chosen name for your business, where you will do business, and your business address. You cannot use a P.O. box—it must be a physical address.

Preserving your personal address through confidentiality can protect your privacy and create a separation between your professional and personal life. There are several steps you can take to preserve some confidentiality and privacy with respect to your business.

Registered Agent

All states have a requirement that an LLC must have a physical mailing address.You are also required to designate a “registered agent” or “agent of the company.” Many single-member LLC owners choose to act as their own registered agent; however, if you work from your personal home or want to keep the address of your business private, you might want to consider hiring a registered agent to accept legal correspondence on behalf of your company to protect the location of your home or business.

Business and Mailing Address

As indicated above, a physical business address is required to form an LLC. However, for some correspondence and other documents needed in the normal course of business, you may be able to obtain a P.O. Box to maintain a level of privacy.

When an address, but not necessarily a physical address, is required—for example, on email marketing to comply with CAN SPAM regulations—another option to protect the privacy of your personal address by renting a “virtual office” space. Many virtual offices exist throughout the country with an option to use their business address as your own. To clarify, a single-member LLC should not use a virtual office address as the address for a registered agent, as no one may be there to accept legal documents on your behalf (including you if you are not there every day during business hours.) However, a virtual office can easily function and operate as your address for your regular office if it has the capability of handling and delivering your mail.

 

EIN Number

 

As a business owner, you will need to file for an Employer Identification Number (EIN) with the Internal Revenue Service (IRS). According to the EIN instructions provided by the IRS, you need to file using the mailing address of your business, which typically is the principal place of business for your company. You cannot use the address of a third-party registered agent or a P.O. Box.

Exceptional Service and Counsel for Your Single-Member LLC

Starting a new business is exciting and challenging. Your LLC cannot be its own registered agent, though you may act as the entity’s registered agent as an individual. Beyond providing an added layer of privacy to your business operations, there are many additional benefits to hiring a registered agent for your single-member LLC including the ease of accepting and filing tax documents and responding to service of process notifications.

At Anderson Business Advisors, we can help you to determine which business entity will best protect your business, personal assets, and privacy. If you determine that appointing a third-party registered agent is best for your single-member LLC, we are available to act in that capacity. Everything about our firm is geared toward fulfilling the true role of a registered agent. We make it easier to run your business without having to worry about compliance and legal issues.

We take the role of a registered agent very seriously and offer our clients a streamlined experience. Our proprietary business monitoring service proactively ensures your business entity is maintaining compliance in over 49 jurisdictions. You can review service of process notifications and filter them by month, lawsuit, and jurisdiction. We offer software for process management tools and electronic payment options.

We would welcome the opportunity to visit with you regarding your new business. Call our office at 800-706-4741 for a free consultation today.

As always, take advantage of our free educational content and every other Tuesday we have Toby’s Tax Tuesday, another great educational series. Our Structure Implementation Series answers your questions about how to structure your business entities to protect you and your assets. One of my favorites as well is our Infinity Investing Workshop.

Additional Resources:

• Join our next Tax & Asset Protection event to learn more advanced tax minimization & entity structuring strategies
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