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California Single-Member LLC

Understanding California Single-Member LLCs

When forming a business in California, it is crucial to consider the type of entity you want your business to operate as. Some individual business owners opt for sole proprietorship due to its simplicity – there is no need for additional paperwork or setup. As soon as you start trading as an individual, you are effectively a sole proprietor. However, it’s important to note that sole proprietors do not benefit from the protections and safeguards offered by more formal business structures.

Many business owners choose to operate as single-member LLCs in order to minimize their tax obligations, simplify paperwork demands, and gain added protections against debts and liabilities. In this article, we will delve into how single-member LLCs function in California, the benefits they provide, and the steps to form a single-member LLC in the state. To learn more about forming this type of LLC, contact our Los Angeles single-member LLC lawyer at the Law Offices of Eric J. Proos, PC.

What Is A Single-Member LLC?

A single-member LLC is a type of limited liability company in California that is owned by only one individual. Consequently, single-member LLCs are the preferred choice among sole proprietors who are currently running their businesses. Moreover, in California, if you and your spouse are joint owners of your LLC, you have the flexibility to be treated as a single owner while still managing your business as a single-member LLC.

Under the current IRS regulations, single-member LLCs are automatically taxed as disregarded entities, meaning they are disregarded for Federal income tax purposes. However, it is possible to change your LLC’s tax status if you prefer to be taxed differently. For most small businesses, being taxed as a disregarded entity is the simplest and most cost-effective way to go.

Single-Member LLC Benefits

If you currently operate as a sole proprietorship, you might want to consider transitioning to a single-member LLC structure in California. By doing so, you can unlock a range of benefits that come with this entity type. These advantages can help mitigate your business risks, enhance your credibility with investors and partners, and ensure optimal tax efficiency. The key advantages of running a single-member LLC instead of a sole proprietorship include:


When you form a single-member LLC in California, you have the flexibility to choose how you want to be taxed. You can opt for a sole proprietorship, or you can go the route of an S-Corp or C-Corp. This gives you the freedom to select the most efficient form of taxation, ensuring that your business remains adaptable and well-suited to its growth trajectory. So, no matter how much your business expands, you can rest assured that you have the right tax structure in place to support its success.


The members of a California Limited Liability Company (LLC) enjoy the benefit of limited liability protection. This means that they are shielded from personal liability for the debts and liabilities of the LLC. In practical terms, this ensures that you, as a member of the LLC, are not personally responsible for covering any financial obligations incurred by the business. Therefore, you can have peace of mind knowing that your personal savings and assets are safeguarded from being used to settle the LLC’s debts and liabilities.


If you desire to maintain confidentiality and keep your identity private, you have the option to establish a single-member LLC anonymously. However, it’s important to note that this choice is not available for sole proprietors, as they are personally liable for their business activities.


Limited Liability Companies (LLCs) are widely regarded as more credible and professional business structures compared to sole proprietorships. This distinction becomes particularly significant when seeking financial support from lenders and investors, as well as when establishing partnerships with other companies. The added legal protections and formalities associated with an LLC contribute to its reputation for stability, transparency, and long-term viability. By choosing to operate as an LLC, entrepreneurs can enhance their prospects for success and establish a solid foundation for their business endeavors.

Establishing a California limited liability company is a seamless and uncomplicated procedure. For the majority of business owners, it is highly advisable to file the necessary paperwork to operate as an LLC instead of a sole proprietorship. This choice is driven by the numerous advantages that this particular structure offers.

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How To Form A California Single-Member LLC

Forming a single-member LLC in California follows a similar process to that of any other LLC, with the key distinction being the sole ownership reflected in the formation paperwork. However, operating as a single-member LLC is generally simpler compared to a multi-member LLC due to the exemption from filing annual K-1 forms.

The process of establishing a California single-member LLC is relatively straightforward. It involves filing an Articles of Organization, Form LLC-1, with the California Secretary of State, accompanied by a $70 filing fee. The Articles of Organization should include a unique name for your LLC, a clear purpose, and details on how the LLC will be managed. Additionally, you must provide the name and California address of the LLC’s registered agent.

In California, all LLCs must appoint an agent for service of process, also known as a registered agent in other states. This can be an individual or a company that agrees to accept legal documents on behalf of the LLC. While an LLC cannot serve as its own agent for the service of process, you have the option to engage a private company for this role.

Lastly, it is important to obtain an Employer Identification Number (EIN), which we will elaborate on later. Establishing an LLC in California is a relatively straightforward process that offers various protections and enhances the credibility of your business when seeking loans, funding, and partnerships with other companies.

How Is A California Single-Member LLC Taxed?

By default, the IRS considers single-member LLCs as disregarded entities. This means that for Federal income tax purposes, they are disregarded. Essentially, your LLC will be taxed similarly to a sole proprietorship. The money earned by your LLC passes through directly and is only taxed when you earn it as an individual. In California, LLC owners may be subject to certain regulations.

  • State income tax
  • Self-employment tax
  • Franchise tax

In California, single-member LLCs are exempt from state-level taxes. Instead, they are taxed based on the personal income tax returns of their owners. The amount of state income tax you will owe depends on your earnings, with tax brackets ranging from 1% to 12.3% for higher-income individuals.

As the owner of a single-member LLC, you are also considered self-employed for tax purposes. This means you must pay self-employment tax on any funds you withdraw from the company, currently set at 15.3%. Additionally, all LLCs in California are subject to an annual Franchise Tax. Most LLCs pay $800, but those with incomes over $250,000 pay a higher amount.

Single-Member LLC vs Sole Proprietorship

Both a sole proprietorship and a single-member LLC are owned by one individual. By default, both are subject to the same tax treatment, with self-employment taxes being paid on income. However, a single-member LLC has additional obligations in California compared to a sole proprietorship. For instance, a single-member LLC must register with the Secretary of State, file biennial reports, maintain a registered agent, provide a California business address, and pay the annual $800 Franchise Tax. On the other hand, a sole proprietorship is exempt from these requirements.

Although a single-member LLC in California may incur higher costs for formation and maintenance, it offers a significant advantage: liability protection. With limited liability, a single-member LLC and its owner have separate liabilities. The owner of a single-member LLC is not personally liable for the business debts. In contrast, a sole proprietorship does not have a legal distinction between the business and its owner. If a sole proprietorship faces a lawsuit, the owner’s personal assets are at risk, and they may be held accountable for all debts.

Contact Our Los Angeles Single-Member LLC Lawyer Today

If you own a small business in California, it might be worth considering restructuring it as a single-member LLC based in California. Operating as a single-member LLC offers numerous advantages to your company and yourself. These benefits include enhancing your business’s credibility when applying for loans and funding, as well as safeguarding your personal assets and savings from potential business debts and liabilities. If you’re considering this type of LLC for your business, contact our skilled Los Angeles single-member LLC lawyer at EJP Law, P.C. to learn more about the next steps and how we can help.