Single-member vs. multi-member LLC

How does the IRS tax a single-member LLC by default?

A single-member LLC is ignored as a separate taxpayer unless it elects otherwise. The IRS says a single-member LLC is disregarded as separate from its owner by default, which people call a "disregarded entity."¹

Disregarded means the IRS doesn't treat the LLC as a taxpayer separate from its owner. For income tax, the same IRS page says the LLC generally uses the owner's Social Security number or EIN.

That page names two cases that make a separate number necessary even for a one-owner company: a single-member LLC needs its own EIN if it has any employees or must file certain excise tax forms; otherwise it generally uses the owner's SSN or EIN for income tax. The EIN guide covers how to apply; on cost, the IRS says an EIN is free; the IRS never charges a fee for an EIN.^{1, 5}

The owner also owes self-employment tax on the profit. The IRS puts the rate at 15.3% of net earnings and says the single-member owner pays it the same way a sole proprietor does. The LLC vs sole proprietorship guide walks through that comparison, since a single-member LLC and a sole proprietorship look much alike at tax time.⁶

Being "disregarded" for income tax doesn't make the LLC disappear under state law. It is still a company registered with the state, with its own name, registered agent and state filings, and the SBA notes that an LLC protects owners from personal liability in most instances, and profits and losses can pass through to personal income without corporate taxes.⁷

How is a multi-member LLC taxed by default?

With two or more owners, the IRS treats the LLC as a partnership unless it elects otherwise. The IRS rule is that a domestic LLC with at least two members is a partnership by default, and the company then files Form 1065, U.S. Return of Partnership Income.^{2, 3}

That return is the main federal paperwork difference between the two kinds. The partnership return applies to an LLC classified as a partnership, so a one-owner LLC under the disregarded default has no partnership return to file, while a two-owner LLC with the same business does.

How the members share profits, votes and buyouts is usually written down in the operating agreement, not in the state filing. That document has its own operating agreement guide.

The IRS facts in our records don't give the partnership return's due date or its late-filing penalty, so we don't state them here. The IRS instructions for the return, or a tax professional, can give both for the year in question.

Can an LLC choose a different tax classification?

Yes. Any LLC, single or multi-member, can ask the IRS to tax it differently by filing Form 8832, Entity Classification Election. The IRS describes the form as the way LLCs elect their business entity classification.³

An LLC that elects to be taxed as a corporation leaves the disregarded or partnership default behind. The other common route is the S corporation election. The IRS says an entity eligible to elect corporate treatment (such as an LLC) can elect S status by filing Form 2553, without a separate Form 8832, so an LLC that wants S status goes straight to that form. Eligibility, the deadline and what changes are in the S corporation election guide.⁸

Neither election changes the LLC's registration with the state: the members, the agent and the annual filings stay as they were. Whether either election makes sense depends on the owners' numbers, which is a question for a tax professional.

What paperwork changes between one owner and several?

The state formation filing is usually the same, while the federal return and the internal agreement differ. Here is how the main items compare under the IRS defaults.

1. Formation filing. One document with the state for either kind. Some states ask who manages the company, and Tennessee charges by member count (see the next section).
2. Federal income tax. A single-member LLC is disregarded by default. A multi-member LLC files Form 1065, U.S. Return of Partnership Income.³
3. For the tax ID, the single-member company may use the owner's number unless it has employees or certain excise filings. The IRS facts we hold don't cover the multi-member case; the EIN guide has more on when an LLC needs one.
4. An operating agreement is useful for a single owner and is the place where several owners record ownership shares, votes and what happens when someone leaves.
5. The yearly or biennial state report in some states, such as Kansas, Texas and New Jersey, lists members, so a change in owners shows up there.

Formation services handle the operating agreement in different ways, and a template written with one owner in mind may need more for a group. Tailor Brands includes the agreement in its Essential and Elite plans but not in Lite. LegalZoom's operating agreements start at $99, Bizee lists the add-on at $99, ZenBusiness sells a $99 one-time template, and Northwest says its template is free. The full plan list shows which tiers include one.^{9, 10, 11, 12, 13}

The federal beneficial ownership report was once a separate filing about owners. Under FinCEN's final rule, U.S. companies are permanently exempt from BOI reporting under a FinCEN final rule effective August 14, 2026, so the number of members no longer changes anything there for an LLC formed in the U.S.¹⁴

Do state fees or reports depend on the number of members?

In some states they do. Tennessee charges by member count, Minnesota has a minimum fee for some multi-member LLCs, and Kansas, Texas and New Jersey ask for members on the yearly report.

Tennessee charges per member

Tennessee is the clearest case in our state records. Its formation fee is $50 per member, $300 minimum, $3,000 maximum, so a single-member LLC pays the floor, and only a company with enough members to pass it pays more. The annual report fee follows the same idea: $300 minimum, plus $50 per member over 6, up to $3,000. The Tennessee LLC guide has the forms and the state's franchise and excise taxes.^{4, 15}

Minnesota's minimum fee for partnerships

Minnesota's annual renewal costs $0, but the Department of Revenue has a separate rule for partnerships. LLCs filing as partnerships with two or more members owe a minimum fee once Minnesota property, payroll and sales total $1,280,000 or more, on a table that runs from $260 up to $12,830. The same page carves out one-owner companies. The minimum fee does not apply to a single-member LLC. Above that threshold, a Minnesota company with one owner and one with two can therefore owe different amounts on identical sales; see the Minnesota LLC guide.^{16, 17}

States whose reports list members

These reports ask for owners or managers by name, so adding or removing a member means updating the next one.

• Nevada requires an Annual List of Managers or Members, filed with the State Business License renewal, which names the managers or managing members. At formation it also requires the Initial List of Managers or Members ($150) due when the Articles of Organization are filed, along with the $200 State Business License.^{18, 19}
• Kansas asks for the name/address of each member owning 5% or more of capital on its biennial report.²⁰
• In Texas, the Public Information Report filed with the franchise tax report asks for all managers (and all members if member-managed).²¹
• New Jersey's annual report asks for the names and addresses of business partners (members).²²

Other reports ask for less. Minnesota's annual renewal asks for a manager or the person exercising principal functions, not every member, and Wyoming's yearly fee is $60 minimum, or $0.0002 per dollar of Wyoming assets if greater (annual report license tax), which turns on assets, not on how many members there are; the Wyoming guide has the details. The state fees table lists each state's formation and recurring fee, and the annual report guide covers deadlines and penalties.²³

What happens when an LLC adds or loses a member?

The tax default follows the member count, so moving from one owner to two, or back, can change how the IRS treats the LLC unless it has filed an election.

Under the two default rules quoted above, a company with one member is disregarded and a domestic company with at least two is a partnership. A single-member LLC that brings in a partner moves from the first rule to the second and would start filing the partnership return. A two-member LLC that buys out one owner moves the other way. The IRS facts in our records don't cover when such a change takes effect, which is a point for a tax professional before the change.

At the state level the change is usually an amendment to the operating agreement and an update on the next report in states that list members. In Tennessee a change in member count can also change the annual report fee, which is $300 minimum, plus $50 per member over 6, up to $3,000. Our IRS facts don't cover what happens to a corporate or S corporation election when members change.¹⁵

Does a multi-member LLC cost more to form?

Usually not at formation, outside Tennessee. The plan prices in our records aren't tied to member count, so the extra costs come later, from the partnership return and a fuller operating agreement.

Elsewhere the formation fee is a single amount, such as $300 in Texas or $100 in New Jersey. Plan prices don't vary by member count either; ZenBusiness's entry plan is $0 and Northwest's plan is $39 + state fees. The LLC cost guide lays out the full first- and second-year picture, and the cost calculator adds any state's fees to each provider's plan.^{24, 25, 26, 27}

The recurring difference is tax preparation. A partnership return is a separate filing, and its preparation fee, if you pay someone, is a cost a single-member LLC doesn't have. We don't track accountants' prices.

Related guides

• What an LLC is, for the basics of liability and default taxes.
• How to form an LLC, step by step in any state.
• LLC for non-U.S. residents, where owners outside the U.S. face different EIN steps, and the services for non-U.S. founders.
• How we rate providers, for the plan compared in our rating.