Frequently Ask Questions
The wording of the Articles of Organization of the LLC creates the LLC when filed with the Secretary of State. The Articles of Organization spell out whether it's a manager-managed or member-managed LLC.
Manager-managed LLC: Charging order protection secures assets from hostile creditor threats.
The charging order protection is what triggers the hostile creditor to be liable for an income tax, without collecting on your assets. This is called “phantom income,” and it’s successfully restricted from the hostile creditor ONLY when the LLC is manager-managed.
They don’t want to confuse you. They know you’re most likely deciding between a C Corporation and an LLC. They don’t want to lose the sale and have you walking away scratching your head. So, they don’t mention it. They prefer to limit your choices and make the decision simple. We prefer to illuminate our clients’ choices and inform.
The operating agreement validates that you did something right, such as bringing in another member, issuing member certificates, or selecting the manager of the LLC.
LLCs intended for asset protection must be designed for that purpose from the ground up. And since many asset protection planners are glorified incorporators, they aren’t prepared to get the job done right the first time. It’s easier for them to just copy another person’s operating agreement.