Single Member LLC
| The Pros | • Simple creation processs. • Easy to operate and dissolve. • No separate tax return. • Easy to integrate business use of home deductions. • Liability protection for member, except for malpractice. • No double taxation of profits. |
| The Cons | • Self-employment tax is assessed on entire profit of the business. • Transfer of ownership can be complex. • Limited access to fringe benefits for owners. • Laws regulating LLCs vary widely among states. |
| Is a Good Fit For | • Businesses with potential liability in operations. • Businesses intended to operate for the owner's life only. |
Multi-member LLC
| The Pros | • Limited Liability for all members, except for malpractice of debt guarantees. • Unlimited number of members. • Separate entity from members, allowing for greater flexibility in operations. • Ownership is in the form of membership interest and can be transferred more easily than ownership in a single member LLC. • No double taxation of profits. |
| The Cons | • Requires a separate tax return. • Law regulating LLCs vary widely among states. |
| Is a Good Fit For | • Businesses requiring equity capital. • Businesses with potential liability in operations. • Businesses intended to exist beyond the lives of the members. • Businesses expecting changes in ownership over time. |
Some Other Considerations
While Limited Liability Companies do offer you protections against courts seizing personal assets, that is predicated on the premise that you are running your business "as a business". For example, if you intermingle your personal and business funds or treat your business as a hobby. A good lawyer could argue that these are personal activities and you are just trying to hide behind the LLC to escape your responsibilities. Thus the term "limited".