A single-member LLC (SMLLC) may be owned by an individual or a business entity. Here’s what you need to know about S-corps and SMLLCs:
What is an S-corp?
The term S-corp is often used to refer to a business entity—however, “S corporation” is a tax status. S corporations (aka S-corps) benefit from being taxed as a partnership while also receiving some of the privileges of a corporation. Because S-corp status is so specialized, business entities must meet certain criteria in order to qualify.
Understanding S-corps can get confusing because both corporations and LLCs can elect S-corp status with the IRS, meaning an LLC can also be an S-corp. For the purposes of this page, we’ll think of “S-corp” as a corporation with S-corp status.
For more information about S-corps, check out Northwest’s page: What is an S-corp?
Can an S-corp own a single-member LLC?
Yes. An SMLLC can be owned by an individual, a group, a trust, an LLC, a corporation—even an S-corp.
How will my S-corp-owned SMLLC be taxed?
A single-member LLC is taxed as a “disregarded entity” by default. The tax status of the business that owns your Single Member LLC won’t affect the way your business is taxed. So even if your SMLLC is owned by a business taxed as an S-corp, your SMLLC will still be taxed as a “disregarded entity.” Just like any other SMLLC, you can also choose for your SMLLC to be taxed as a partnership or a corporation.
You can find more information about SMLLCs and taxes on the IRS’s page about Single Member Limited Liability Companies.
How do I register an S-corp-owned SMLLC?
Registering a single-member LLC owned by an S-corp is easier than you might think. You’ll simply follow the normal procedure for registering an LLC in your state, which typically requires:
- Obtaining a registered agent
- Naming your LLC
- Filing articles of organization
- Applying for an EIN
- Writing an operating agreement
- Opening a bank account
BUT, when filing LLC Articles of Organization, be sure to include the name of the S-corp as the sole owner (or “member”) of your LLC.