Single-Member LLC vs Multi-Member LLC in Georgia

Written by Wesley Henderson

November 15, 2022

A limited liability company (LLC) is an attractive option for small businesses in Georgia because it does not have complex requirements compared to a corporation. It also offers financial flexibility through asset protection and tax advantages. The security that LLC gives its owners from personal liability and debts also makes this an ideal option for business owners.

However, did you know that LLCs have different owner options, like single-member and multi-member? This short guide will discuss the basics of LLC in Georgia and what differentiates a single-member LLC from a multi-member LLC.

The Basics of LLC in Georgia

Before proceeding with the differences in owner options, it is essential to understand how to form an LLC in Georgia. A business interested in creating an LLC should register the company with the Georgia Secretary of State. The steps needed to be taken to be able to register the LLC are as follows:

  • Choose a name for the LLC.
  • Select a registered agent.
  • Submit articles of organization (and transmittal form as needed).
  • Comply with other requirements by the state.
  • Accomplish annual registration reports.
  • Comply with federal laws, such as obtaining an employer identification number (EIN).

Single vs Multi member LLC Video

Single-Member & Multi-Member LLC Differences

Now, it’s time to learn about the difference between single-member and multi-member LLCs. Read on below to know more.

Number of Owners

Only one owner/member constitutes a single-member LLC. This means that the LLC only has one member who controls the company. The LLC is separate from its owner, which means it is its legal entity.

On the other hand, a multi-member LLC consists of two or more owners and members. Multi-member LLCs have multiple entities involved in controlling the company. It’s the same with single-member LLC; the LLC is independent of the owners, becoming its legal entity. There is no limit to the number of members allowed in this type of LLC, and the LLC has the power to rule on how net income and losses are shared among the members.

Management Types

When it comes to LLC management, a single-member LLC in Georgia has one manager (the owner/member). In the case of a multi-member LLC, the company must choose whether to have its business member-managed or manager-managed.

Protection of Personal Assets and Taxation

Both single-member LLCs and multi-member LLCs offer the same protection of the personal assets of the member(s) since the LLC is legally recognized as a separate entity. The former is considered a sole proprietorship in tax treatment, while the latter is deemed a partnership.

Operating Agreement

Regardless of the LLC ownership option or management, it is advisable to create an operating agreement. While this is not typically required in forming the LLC, it ensures that all members have a common understanding of how the business would be run and have clear roles and responsibilities delegated to each member. An operating agreement also establishes guidelines to follow in cases of dissolution of the company or separation of its members.

Conclusion

To summarize, the main difference between single-member LLCs and multi-member LLCs is the number of members/owners who have authority over the company and the tax treatment. Forming an LLC for your business is beneficial because of its asset protection and flexibility.

Wesley Henderson

Hi, I'm Wesley! A business attorney turned entrepreneur devoted to simplifying how you protect your business and your assets. Like you, I'm an business owner so I get it and I started Drafted Legal to help you put in place simple and sound legal strategies so you can focus on your business and not worry about getting lost in legal nuances.

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