Use our Single-Member LLC Operating Agreement to help prove that your sole-owner LLC is a separate legal entity.
Updated May 25, 2024
Written by Josh Sainsbury | Reviewed by Brooke Davis
A single-member LLC operating agreement outlines the purpose, finances, and operations of an LLC with one owner. This document helps establish limited liability — the separation between the business and the owner’s assets.
Since there is only one signatory, it’s recommended that the owner sign the operating agreement in the presence of a notary public to ensure it’s time-stamped.
A single-member LLC (SMLLC), also known as a sole-member LLC, is a limited liability company (LLC) with one owner (member). It protects its owner’s assets from the company’s debts and obligations as a separate entity.
A single-member LLC operating agreement can also be called a sole-member LLC operating agreement.
A single-member limited liability company benefits from tax classifications similar to those of a multi-member LLC. According to the Internal Revenue Service (IRS), it is classified as a disregarded entity, meaning it doesn’t file a tax return on behalf of the business.
The owner’s federal tax return records the business’s profits and losses. The earnings are subject to self-employment taxes using Schedule C in the same manner as a sole proprietorship.
Alternatively, a single-member operating agreement can be taxed as a corporation by filing an Entity Classification Election (Form 8832).
It’s important to note that all states charge an annual fee for limited liability companies. For example, any LLC doing business or organized in California must pay $800 annually.
A sole proprietorship and a single-member LLC are both owned by one person.
However, unlike a limited liability company, a sole proprietorship is not legally separated from its owner. This means the owner is still liable for the business’s debts, losses, and legal obligations.
Operating agreements are required for single-member limited liability companies registered in California, New York, Missouri, Maine, and Delaware.
While not needed for the remaining states, creating an operating agreement when establishing your SMLLC is highly advised.
You may not need an agreement if you’re forming a limited liability company. However, it’s highly recommended that you create one for the following reasons:
The steps to creating a single-member operating agreement are as follows:
There are several elements that a single-member LLC operating agreement must include:
The content should describe your business’s purpose, operations, and finances.
a) This is the state where the LLC was formed.
b) The date the agreement is entered into is as follows:
Provision A
List the legal name under which you will operate and file taxes. This may or may not be your name for marketing or other purposes.
However, this should be your name so you can legally file the LLC in your state.
Be aware that states have specific requirements for how you name your LLC. This varies by state, so be sure to check with your Secretary of State or the equivalent business formation office in your state for the naming requirements of your LLC.
Provision B
List the primary location where business is conducted. This will be the physical address that you used when you filed to register the LLC in your state.
If you do not have a physical address for operations, this will be the address you listed when you pointed to register your LLC with your state.
The physical address may be the same as your registered agent address, which you must provide if you need to receive service or official documents on behalf of the company.
Provision C
List the state or states where the LLC is registered and operating.
Provision D
The registered agent is the designated individual or company physically located within the state that can receive service of process or other correspondence on behalf of the LLC.
A member in the state can be appointed as a registered agent for the LLC.
Include the full physical address of the registered agent, where service of process or other legal or official correspondence can be delivered or served upon the company. This cannot be a PO Box.
Provision E
This is the date when the LLC officially begins operations. This may or may not be the same date as the date of this operating agreement.
Provision F
This is the timeframe that the LLC will follow to establish an entire year. Most businesses follow the calendar year, which runs from January 1 through December 31; however, you can choose a different time frame as long as it is a full year.
For example, your fiscal year can run from April 1 through March 31.
a) List the full legal names of the sole member of the LLC. In an LLC, a member has ownership and voting rights within the company. Also, include the complete physical address.
b) This is the number of units the LLC may issue its members. It is common for a single-member LLC to give one class of membership units—for example, 100 regular units to the sole member.
Outline capital contributions, including cash, property, and other assets you make to the business as the sole owner.
Describe how you will be compensated by the LLC, for example, by receiving a regular salary or periodic lump sum payments. Including this in your single-member LLC operating agreement demonstrates to tax agencies that the business is separate from you.
Provide a plan for your business management and assets if you die or become incapacitated. If you want to name a successor, use this section.
a) This is the state in which the LLC was formed.
Sign the SMLLC operating agreement – since you’re the only one signing the document, it’s recommended that you mark it in the presence of a notary public.
