As stated in my last blog post, “”According to Paul Simon, numerous options exist for leaving your lover including “Just drop off the key, Lee, and get yourself free . . . .” Contrary to this smorgasbord of choices, the Revised Code of Washington (RCW) sets forth only two ways for you to manage your LLC. “” The blog post goes on to provide the statutory basis for member-managed LLCs and manager-managed LLCs. But, how do you choose? Let me provide two examples:
Jack and Jane, husband and wife, own a vegan smoothie café in Seattle. They operate their business via a limited liability company. They are both members of the LLC, and each owns a 50% interest. Both Jack and Jane are highly involved in the daily operation of their café. They pay the rent, serve the customers, converse with the accountant in regard to the tax liabilities, and perform all the necessary functions of business owners. Accordingly, Jack and Jane, upon the advice of counsel, have chosen to manage their LLC as a member-managed LLC. Why? Because the members of the LLC are all deeply involved in running the business. As stated in RCW 25.15.151(a), “If the limited liability company is member-managed: Management of the activities of the limited liability company is vested in the members.”
As a second example, Jack and Jane continue to own a vegan smoothie café, and continue to operate their business via a limited liability company. However, Jack and Jane started the café with seed money from eight other family members. These family members agreed to provide some initial capital to start the business, in exchange for a share in the café’s profits down the road. They have no interest in running the café, and leave the daily management decisions in Jack’s and Jane’s capable hands. The LLC membership consists of 10 members: Jack, Jane, and the eight other family members. Jack and Jane, upon the advice of counsel, have chosen to manage their LLC as a manager-managed LLC. They are the managers. Why? Because not all the LLC’s members are involved in running the business – only Jack and Jane possess management responsibility. As stated in RCW 25.15.154(1)(a), “If the limited liability company is manager-managed: “Management of the activities of the limited liability company is vested in one or more managers.”
Do you have questions on which management option would work the best for your business? We’d be happy to help!
Photo credit: Nick Webb on Flickr