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Solo owned businesses make up the largest percentage of business in the US. However, when the LLC laws were first passed, some states did not allow for a single owner to get the protections of this legal entity. This did not make sense and so now all states allow a limited liability company to be owned by just one member. Solo owners need protection just as much as others.

A sole proprietorship business, which is one operated without the benefit of a legal entity, causes the solo business owner to place everything he owns at risk of loss. This stifles new business growth. The single member LLC is the ideal entity for these solo owned ventures because they are very affordable to form and easy to operated and maintain. Now, solo owners can get the personal asset protection they need.

However, the single member limited liability company must have an official and written single member LLC operating agreement. This is because the liability protection is more vulnerable in a single member LLC.

Lawyers have creative and aggressive ways of trying to get at the personal assets of a single owner LLC business. They will state facts and make arguments that the solo owner himself did not operate his business through the LLC but rather just ignored it and ran as a sole proprietorship. Some have strong cases because it is all too easy to forget about the LLC when you have no other business owners to answer to. But the cold hard fact is that the laws protect single owners of a limited liability company so you must do things to make sure you always get this protection.

But, it always makes sense to anticipate this challenge and do everything you can to show the world that your business is being operated through the legal entity and not by you in your personal capacity. The most important action you can do is to adopt a set of operational and governance rules for your single member LLC. These provisions are in the single member LLC operating agreement. When you complete this formality, you are providing evidence to the outside world that your limited liability company is a separate being with its own rules and processes.

This is essential business planning. If you ever run into problems or are sued for business activity, the first thing a judge will want to see is your official LLC paperwork and when it was adopted. Without one, he will question whether you have been properly maintaining your LLC and operating your business through this legal entity. Prevent this suspicion from the beginning and ensure your personal liability protection with an official single member LLC operating agreement.