Single-Member LLC The most common new business structure.

The "disregarded entity" classification is sometimes confusing. It means the IRS ignores the LLC for federal income tax purposes; the owner reports business profits and losses on Schedule C of their personal Form 1040, just like a sole proprietor would. But the LLC is not the same as a sole proprietorship for liability purposes. The state-law separation between the owner and the LLC remains.

For most solo founders, a single-member LLC is the right structure. It provides liability protection, costs almost nothing to maintain, and does not require a separate federal tax return. Compared to a sole proprietorship, you get the liability shield. Compared to a multi-member LLC or corporation, you avoid the additional tax filings.

Single-member LLCs can elect S-Corp tax treatment by filing Form 2553 with the IRS, typically once net profit (after expenses, before owner pay) crosses $60,000 to $80,000. The election lets the owner pay themselves a reasonable salary through payroll, then take the remainder as distributions exempt from self-employment tax. The election is reversible (but with a 5-year waiting period before re-electing).