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Single Owned Business Entity

A Review of 2018 Forbes Youngest Self Made Billionaire Kylie Jenner’s Business Empire


a. Statement of Facts (The Forbes Rating)
August 2018 introduced a new age for self-made Billionaires as Makeup mogul and American Reality star Kylie Jenner replaced Mark Zuckherberg (CEO Facebook) as Forbes Youngest Self Made Billionaire. At the age of 21, Kylie Jenner runs a very successful business empire called Kylie Cosmetics. Kylie Jenner who is the youngest of the Kardashian-Jenner clan is an American Reality TV star. Kylie is best known for her Lips and Social Media presence, both of which she leverages into her business.  According to Forbes, she is worth $100 million while her business is $800 million. The business and her personal income rank her as the youngest self-made Billionaire at $900 Million. 
This is quite impressive for a business that launched in November 2015 with a 15,000 Lip Kits at $29. Her empire currently produces: Lipsticks, Lip Liners, Eyeshadow Palletes, Concealers and Brushes and has sold over $630 Million worth of makeup in 2018, including an estimated $330 Million in 2017. 

These estimates were arrived at by Forbes after considering its conservative multiple and 20% discount. Kylie Cosmetics is a Single Member Limited Liability Company (SMLLC) that operates in Calabasas, California. That is the reason why her business and personal income were combined to arrive at her net worth. 

While working on this post, I questioned the possibility of a Single-Member Limited Liability Company (LLC), as I currently reside in Lagos, Nigeria and our legislation over here doesn’t permit single owned LLCs. The law in this region requires that an LLC must have at least two (2) shareholders. 

Consequently, the variance in Law was initially a conflicting issue for me. Based on Nigeria legislation, if Kylie Cosmetics were to operate in Nigeria it would either require at least one other shareholder to operate as an LLC or the entity would just operate as a Sole Proprietorship. 

Such legislation doesn't only apply in Nigeria as some states in America still require a minimum of two owners.  However, Solely owned LLC are allowed to operate in states like Califonia where Kylie Cosmetics runs her business empire.

b. My review 

A review of some facts about Kylie Cosmetics indicates the following;

  1. The Business Structure

Kylie Cosmetics is a single member Limited Liability Company. A SMLLC is a business entity registered in the state where the Company does business. 

The term single member is recognition that the LLC has one owner, and that the owners of an LLC are termed “members”.

As a Limited Liability Company, the single-member LLC has all the advantages and disadvantages of all Limited Liability Companies.

The two (2) major distinguishing factors between an LLC owner and the owner of a corporation are as follows;

  • The owner of an LLC doesn’t get paid a salary; he or she isn’t an employee. Instead, the owner takes money out of the business as needed for personal expenses.
  • The owner of the LLC puts money into the business as needed, by making a capital contribution from his or her own personal funds.

Not all states in America allow the operation of Single member Limited Liability Company. States like California allow this kind of Companies to operate. Kylie Cosmetics operates in California. In California, you can operate your business either as a Sole Proprietorship or as a Limited Liability Company but never as both. 

The single-member Entity is 100% owned by an individual and has only one member, who is also the owner of the business. The LLC offers Limited Liability to its owner, in that the owner is protected from individual liability. 

Consequently, Kylie Jenner owns 100% of the stake in Kylie Cosmetics.Kylie claims to have funded the business through her modeling gigs earnings ($250,000) which she used to produce the first 15,000 Lip kits in 2015.
     2. Advantages of a Single-Member LLC over a Sole Proprietorship

Although Single member LLC and the sole proprietorship are solo business entities, there are some advantages to having a sole proprietorship business become a single member LLC:

  • The Single-member LLC is now separate from its owner. It is no longer attached to and identified with the owner for tax or liability purposes.
  • The single-member is recognized as a legitimate business, with the required “LLC” included in the business name.
  • The single member LLC is formed within a state and part of the approval process is a registration of the business name, so no other business in the state may use that name. (A sole proprietor may also register a business name with a state, but it is a separate process).
    3. How to form a Single Member LLC

To form a single member LLC, you must go to your state’s department of state (business division) to obtain information the process, including filing Articles of Organization (Certificates of Organization in a few states) and paying a filing fee. 

After filing this state business registration, you should consider also preparing an operating agreement (similar to by-laws for a corporation), to indicate how the business would be operated.

    4. Single-Member LLC’s Taxation

This type of LLC is treated by the IRS as a ‘Disregarded Entity’. The business is disregarded from its owner for Income Tax purposes. This means that any profit or loss from the business can be reported on the member’s personal Income Tax, or 1040 & Schedule C forms. 

Therefore, Single-Member LLCs like Kylie cosmetics are treated as a Sole proprietorship for Tax purposes just like it applies her in Nigeria. The net income from the business is combined with other income on the owners’ personal income tax.

Periods from January 1 2009, IRS rule requires SMLLC to request an Employer Identification Number (EIN).

In conclusion, Forbes rating of Kylie Jenner and Kylie Cosmetics as one is very accurate as the business slightly varies from its owner (SMLLC). Basically a SMLLC is an incorporated Sole proprietorship with the sole proprietor having his/her limited to his/her shares. 

I hope this post has helped enlighten my readers and we anticipate that in the coming years other states in America would adopt this trend of single owned LLC. It is anticipated that countries like my own to adopt this kind of Legislation.

Regards,
Deyo Layeni

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