{"id":860,"date":"2019-09-26T12:28:27","date_gmt":"2019-09-26T19:28:27","guid":{"rendered":"https:\/\/www.jacksonwhitelaw.com\/az-small-business-representation\/?p=860"},"modified":"2023-07-11T10:39:35","modified_gmt":"2023-07-11T17:39:35","slug":"multi-and-single-member-llc","status":"publish","type":"post","link":"https:\/\/www.jacksonwhitelaw.com\/az-small-business-representation\/blog\/multi-and-single-member-llc\/","title":{"rendered":"The Difference Between Multi-Member and Single-Member LLCs in Arizona"},"content":{"rendered":"<p>Whether you choose a multiple-member or <a href=\"https:\/\/www.thebalancesmb.com\/what-is-a-single-member-limited-liability-company-4044671\" target=\"_blank\" rel=\"noopener noreferrer\">single-member LLC<\/a>, you\u2019ll have to consider more than just the number of people it involves. Due to the benefits and drawbacks of each classification, a single person may choose to create a multiple-member business, while multiple people may choose to opt for single-member companies.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<p>When it comes to multiple-member companies, you will need to carefully spell out everyone\u2019s rights in case of an irreconcilable disagreement, death, or split-up. Single-member LLCs are simpler for taxes because they don\u2019t require a federal tax return unless you opt for the business to be treated like a corporation. In this case, income will be reported on the individual\u2019s income tax return.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<p>Multiple-member LLCs will not only file a tax return but also give each member a <a href=\"https:\/\/www.irs.gov\/forms-pubs\/about-schedule-k-1-form-1065\" target=\"_blank\" rel=\"noopener noreferrer\">K-1 form<\/a> to submit with their tax forms. In some cases, hiring an attorney is imperative for making sure your business is lawfully run.<\/p>\n<h2>What to Consider With Multi-Member LLCs in Arizona<\/h2>\n<ul>\n<li>Whether you should choose a single or multi-member LLC doesn\u2019t only depend on the number of members involved<\/li>\n<li>An operating agreement is good to have, regardless of whether you choose a single or multi-member LLC<\/li>\n<li>Ownership, management, and tax considerations may all differ depending on which you choose<\/li>\n<li>Working with an attorney in the process of forming an LLC will help protect you against unforeseen difficulties<\/li>\n<\/ul>\n<p>The main difference between multi-member and single-member LLCs is obvious, but there are important nuances to think about before selecting one of these options. You\u2019ll want to consider <a href=\"https:\/\/www.investopedia.com\/articles\/retirement\/07\/buildawall.asp\" target=\"_blank\" rel=\"noopener noreferrer\">personal asset protection<\/a>, ownership and management, compliance, formation, and more. The entity type selected will affect many crucial aspects of the business, so this isn\u2019t a decision you should take lightly.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<h2>Operating Agreements<\/h2>\n<p>Whether you choose a multi-member, single-member, multi-member managed or <a href=\"https:\/\/www.thebalancesmb.com\/should-my-llc-be-member-managed-or-manager-managed-398641\" target=\"_blank\" rel=\"noopener noreferrer\">manager-managed LLC<\/a>, you should make an <a href=\"\/az-small-business-representation\/llc-operating-agreement\/\">operating agreement<\/a> for the business. While operating agreements are not required by state law in Arizona, it will help ensure you are on the same page as the other owners when it comes to each person\u2019s responsibilities, roles, and more. It also helps lay out a plan for how to handle future disagreements, dissolution of the company, and other concerns.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<h2>LLC Ownership<\/h2>\n<p>Every state allows eligible individuals to form an LLC business structure, which is its own legal entity. Single-member LLCs will have a single member\/owner who controls the company entirely. Multi-member LLCs have at least two members\/owners who share control over the business.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<p>You may choose an unlimited number of owners in this type of LLC, unless you choose <a href=\"\/az-small-business-representation\/llc-taxed-as-s-corp\/\" target=\"_blank\" rel=\"noopener noreferrer\">S corporation<\/a> tax treatment (in which case it must be 100 or fewer). You might choose a multi-member LLC even if you\u2019re a single business owner, if you want to make a relative a member, for instance.<\/p>\n<h2>LLC Management<\/h2>\n<p>Single-member LLCs have a single member who is also the manager. Multi-member LLC owners, on the other hand, must choose between having a manager-managed or member-managed business. In a member-managed arrangement, all of the owners are involved in the company\u2019s work. This requires majority approval for securing loans, entering contracts, and other important business decisions.<\/p>\n<p>For manager-managed LLCs, members choose a manager (from the LLC members or a third-party), who will have the authority to oversee daily operations and company decisions. Other, non-manager members may make strategic, high-level decisions or act as passive owners.<\/p>\n<h2>LLCs and Personal Asset Protection<\/h2>\n<p>Both multi-member and single-member LLCs protect the personal assets of the owner. Since the LLC is its own legal entity separate from the members, the owners\u2019 personal property is protected in case of liabilities. If, for example, the business can\u2019t cover its debts or someone sues the LLC, the members\u2019 own property (like their car, bank accounts, and other assets) won\u2019t be subjected to collections. However, if a member has done something illegal or committed <a href=\"https:\/\/www.jacksonwhitelaw.com\/criminal-defense-law\/fraud\/\" target=\"_blank\" rel=\"noopener noreferrer\">fraud<\/a>, this may change.<\/p>\n<h2>How Working With an Attorney Can Help<\/h2>\n<p>LLCs are flexible, simple, and allow you to manage your company on your own or with partners. If you have more questions on which entity to select, hiring an attorney can be helpful during the process. They will help you go over your options in detail, so you can make an informed decision. A business attorney can help you with filing documents, drafting contracts, and answering your tax questions.<\/p>\n<h2>Frequently Asked Questions on LLCs in Arizona<\/h2>\n<p>Here are some common questions related to LLCs in Arizona:<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<h2>Q: What do I need to keep in mind about sales tax?<\/h2>\n<p>If you\u2019re selling goods through your LLC in Arizona, you must collect and pay sales tax to the state. You\u2019ll need to register with the <a href=\"https:\/\/azdor.gov\/\" target=\"_blank\" rel=\"noopener noreferrer\">Department of Revenue<\/a> online or by mail. Once you\u2019ve signed up, you will receive a sales tax license and must send the DOR regular sales tax returns.<\/p>\n<h3>Q: What do I need to know if I plan to do business in other states?<\/h3>\n<p>If you plan to do business in multiple states, you might have to also register your LLC in those locations. Whether you must register in the states you do business in depends on the state laws involved. Often, hiring employees in another state or soliciting business in that location will count as doing business and require that you register. Registration usually requires that you obtain the necessary certificate to do business legally.<\/p>\n<h3>Q: What are some of the drawbacks involved in choosing a multi-member LLC?<\/h3>\n<p>As with any important <a href=\"\/az-small-business-representation\/\">business<\/a> decision, you should think about the disadvantages of choosing a multi-member LLC, especially concerning taxes. For example, multi-member LLC requires that you file a partnership return come tax season, which comes with difficult rules. Rather than the single member filing a return, they will report the business income using their personal tax return.<\/p>\n<h2>What to Do if You Need Help With a Multi-Member LLC in Arizona<\/h2>\n<p>Starting a small business can be intimidating if it\u2019s your first time. Whether you need help drafting a contract, choosing a tax classification, or making sure you\u2019re following state laws, contacting a <a href=\"\/az-small-business-representation\/\">business attorney<\/a> is advisable.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<p>Call JacksonWhite&#8217;s Small Business Law Team at <a href=\"tel:4804641111\">(480) 464-1111<\/a> to discuss your case today.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Whether you choose a multiple-member or single-member LLC, you\u2019ll have to consider more than just the number of people it involves. Due to the benefits and drawbacks of each classification, a single person may choose to create a multiple-member business, while multiple people may choose to opt for single-member companies.\u00a0 When it comes to multiple-member [&hellip;]<\/p>\n","protected":false},"author":21,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"default","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[5],"tags":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.5 - 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