When A Single-Member LLC Isn't And When A Multiple-Member LLC Is

Single-member LLCs ("SMLLCs") are curious and highly useful creatures. Much of that utility is based upon their ease of organization (seldom will the sole member need to engage in detailed negotiations as to the terms of the operating agreement) and the default federal tax treatment as disregarded entities. That utility can be hampered when there is a question as to whether or not the LLC is in fact an SMLLC. Careful attention, both at the time of formation and the throughout the LLC's life, as to whether or not it is in fact an SMLLC is necessary. Absent that attention, there may be surprises, and seldom are surprises welcome. These same principles find sometimes curious application in other unincorporated forms. Conversely, we find circumstances in which at least the tax code will conflate two persons into one or in some other way elect not to treat what would otherwise be a partnership other than as a partnership.