In a single word, yes. The most common reasons people form single member LLCs is to avoid being held personally liable for their small business dealings and/or to protect certain assets. However, forming an LLC is not always foolproof to shield assets and, in some rare situations, the “corporate (or LLC) veil” between the LLC and the owner can be pierced such that the owner is held personally liable. (More on piercing the corporate veil)
Taxation of the single member LLC is relatively simple at the federal level. For filing purposes, a single member LLC is listed on Schedule C of the owner’s personal federal income tax return as a “disregarded entity.” (See) In this regard, it is not that much different than a sole proprietorship. (An LLC versus the sole proprietorship discussed ) Although the single member LLC is part and parcel of the owner’s federal income tax return, it is treated as a separate entity for the purpose of paying payroll taxes if the LLC has employees. Taxation of a single member LLC at the state level varies state-by-state.
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