- Who can own one
- How the IRS classifies an LLC
A limited liability company, or LLC, is set up under a state's law and owned by one or more people or entities called members. How it's taxed depends on the number of members and on any election it files with the IRS.
In the US, the IRS says (page last reviewed or updated October 10, 2026): "A limited liability company (LLC) is a business structure allowed by state statute." It also says "Each state may use different regulations, you should check with your state if you are interested in starting a Limited Liability Company."
Who can own one
The same IRS page says "Most states do not restrict ownership, so members may include individuals, corporations, other LLCs and foreign entities." and "Most states also permit “single-member” LLCs, those having only one owner." It notes: "A few types of businesses generally cannot be LLCs, such as banks and insurance companies."
How the IRS classifies an LLC
The IRS page (page last reviewed or updated October 10, 2026) sets out the default treatment:
The IRS says "Specifically, a domestic LLC with at least two members is classified as a partnership for federal income tax purposes unless it files Form 8832 and affirmatively elects to be treated as a corporation." For one owner, the IRS says "For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and elects to be treated as a corporation." It adds: "However, for purposes of employment tax and certain excise taxes, an LLC with only one member is still considered a separate entity."
Which treatment suits your business is a question for an accountant.
Liability and self-employment tax, as the SBA describes them
The SBA says (checked October 31, 2026): "LLCs protect you from personal liability in most instances, your personal assets — like your vehicle, house, and savings accounts — won’t be at risk in case your LLC faces bankruptcy or lawsuits." It adds: "However, members of an LLC are considered self-employed and must pay self-employment tax contributions towards Medicare and Social Security." How far that protection goes for your business is a question for a lawyer.
Worked example: ownership shares from contributions
Sample figures: two people form an LLC. One puts in 15,000.00 and the other 5,000.00, so the total is 15,000.00 + 5,000.00 = 20,000.00. If their operating agreement sets ownership by contribution, the shares are 15,000.00 ÷ 20,000.00 = 75% and 5,000.00 ÷ 20,000.00 = 25%. The agreement can set ownership differently; a lawyer should draft it.
Where Billed fits
An LLC's invoices go out under the LLC's own details. Billed's invoice software page says "Choose an invoice template, add your logo and business details, and save the products and services you sell so you can pull them into an invoice instead of retyping them." It also says "Invoice reports show which invoices are paid, partially paid or past due, and you can see who owes you money and send them a payment reminder."
When this guide isn't for you
If you're deciding between an LLC and another structure, start with the structure guide and talk to a lawyer or an accountant. If you're one person trading without forming anything, the sole proprietorship guide applies.
Related Articles
- How to Choose a Business Structure
- What Is a Sole Proprietorship?
- What Is a Business Entity?
- How to Manage Business Partnerships
Frequently Asked Questions
How is a single-member LLC taxed?
The IRS says (page last reviewed or updated October 10, 2026): "For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and elects to be treated as a corporation."
Can an LLC choose to be taxed as a corporation?
The IRS says (page last reviewed or updated October 10, 2026) that an LLC that "wishes to change its classification, uses Form 8832, Entity Classification Election" to "elect how it will be classified for federal tax purposes." Ask an accountant before you file it.
Does an LLC protect my personal assets?
The SBA says (checked October 31, 2026): "LLCs protect you from personal liability in most instances". A lawyer who knows your state can tell you how it applies to your business.