hi Lee Phillips here again yep I'm one of them liar I mean lawyers liar that's Texan for attorney
I'll go down and see your liar anyway let me talk about a concept in LLCs called member managed
versus manager managed and you may have been to the lawyer and you said well do I want it to be
member managed or manager managed and the answer is who cares actually it makes a huge difference
I ran into a situation this last week where the individual had set up an LLC and then had his
IRA buy the membership interest the stock in the LLC and then he was managing the LLC
they had the lawyer had set it up for him right but here's the new ones
if you choose member managed then only an owner a member can be a manager
now in the case I just explained he wasn't the member he wasn't the owner he was the manager
so it had to be the choice of manager managed you're going to hire somebody
or somebody who isn't an owner is going to be the manager of the LLC now in 99% of the cases
it's your little company you're going to be the manager you're going to be the owner
you're the member and you're the manager so it's member managed just pick that one
what do I mean pick well there's a concept that I call pick two in LLCs
back in 1977 when Wyoming created the first LLC legislation in the United States
the question was Mr IRS how do you want to tax this and it took 20 years for the IRS
to figure out how they were going to tax an LLC but during this period they came back to Wyoming
and they said well how do we know this isn't just a corporation and Wyoming thought about
it and a corporation has four elements it has the corporate shield the limited liability
it has transferability I can sell the stock freely it has centralized management
which means by definition I can have the officers directors president and they do not have to be
owners of the company they can be hired guns so it has centralized management and then it also
has what we call continuity of life and I've done YouTubes on each one of these four elements but
Wyoming came back and said well we'll make it so that it's not a corporation we will only
have two of these elements and the people get to choose which two of the elements they have
what you're going to pick in your LLC limited liability the corporate shield
and which one of the other three you're going to pick doesn't really matter if you pick manager
managed you have picked centralized management you can't pick transferability or continuity of life
and by the way continuity of life doesn't mean the company goes on forever that's not the term of the
company that's whether or not the company dies when one of the owners one of the members dies
but you only get to pick two well if you pick manager managed which the guy had to do in the
case where his LLC was the member the owner then or not the the LLC was the member the owner the
IRA was the member of the LLC but he had to pick manager managed so he can't pick the other two
I'd probably always pick member managed if it's going to be my company and I'm going to run it
I don't need I never am going to hire a gun to come in and manage my company you can always
go back in your operating agreement and redo which two of these you're picking so so that's
okay but often and and by the way I read this guy's operating agreement and it didn't tell me
so I said please give me your actual articles of organization that you filed with the state
and sure enough right there on the articles of organization the paper you file with the state
manager managed so remember manage versus manager managed if you're going to own it
you're going to manage it pick member managed then you can pick either continuity of life
or transferability if you're in a situation where the owner whether it's your
IRA and by the way I don't like IRA LLCs that's another video but if you're going to pick
you're going to have your IRA for example be the owner and I've got to have somebody else
be the manager you've got to pick manager managed if you ever think
yeah you know I might hire a guy to be my CEO my manager of my LLC then you would pick manager
managed that's kind of a little bit of information on what the difference between member managed
and manager managed is and yes it does make a difference which one you pick oh don't forget to
subscribe we're putting out a lot of these videos and we'll give you a little update on each one
of them if you'd like the language by the way in your LLC for member managed versus manager managed
give me an email info at legalees l-e-g-a-l-e-e-s that's my channel info at legalees.com and just
say I want language for member managed manager managed LLCs Lee Phillips talking about your LLC