Single-member LLC (SMLLC)
A limited liability company with one owner. Treated as a disregarded entity for federal tax purposes by default.
Definition
A single-member LLC (SMLLC) is an LLC with exactly one member. Under Treas. Reg. § 301.7701-2, an SMLLC is a 'disregarded entity' for federal tax purposes by default, meaning the IRS looks through to the owner. The SMLLC can elect C-Corp taxation via Form 8832 if preferred.
Context
Most non-resident bootstrap founders form single-member Delaware LLCs. This is the structure that triggers the Form 5472 obligation under foreign ownership. Multi-member LLCs default to partnership treatment instead.
Example
A solo Indian founder forms a Delaware single-member LLC. Federal tax flows through to the founder personally (no entity-level tax). The LLC files Form 5472 + pro forma Form 1120 each year due to foreign ownership.
Common pitfalls
- Form 5472 applies to foreign-owned SMLLCs and is the most expensive thing to miss.
- Default disregarded-entity classification is automatic; founders sometimes incorrectly assume they need to elect it via Form 8832.
- Adding a second member changes the federal tax treatment to partnership; Form 5472 obligation ends and Form 1065 obligation begins.