I'm starting a small consulting business and want to form an LLC. But I keep hearing that I need a business partner to make it legitimate. I don't want a partner, I want full control. Is it possible to have an LLC without one? What are the drawbacks? I'm in California if that matters.
LLC Formation
I want an LLC but don't want to bring in a business partner
You absolutely can have a single-member LLC. No partner needed. The main thing is you'll be taxed as a sole proprietorship by default but you can elect S-corp status later if you want.
Whoever told you that is wrong. I've had a single-member LLC for years. Just make sure you keep personal and business finances separate.
In California, there's an $800 annual franchise tax for LLCs, even single-member ones. That's a drawback people don't always mention.
Thanks for the replies. i'm aware of the $800 fee, but it's worth it for liability protection. I guess my main worry is that without a partner, I might look less credible to clients. Is that a real issue?
Clients care about results, not whether you have a partner. I've been a solo LLC for five years and never had an issue.
It might matter for certain contracts or loans, but generally no. You can always hire employees or contractors without making them partners.
One thing to consider: if you ever want to bring in investors, a single-member LLC can be more complicated to convert. But if you're staying solo, it's fine.
Also, some banks might be hesitant to lend to a single-member LLC without a personal guarantee. But thatt's true for most small businesses anyway.
Make sure you have a proper operating agreement even if it's just you. Some states require it, and it helps with liability protection.
And don't forget to file your Statement of Information with the California Secretary of State every two years. It's easy to misls.