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Moving from Member Managed to Manager Managed LLC

Keller, TX |

I formed a member managed SMLLC in Texas however I have read that this does not protect my personal assets as well as Manager Managed LLC. What do I have to do to make a change to Member Managed LLC in Texas? I want to assign a very small percentage of the company to my son-in-law to assist with protection of my assets - what do I need to do to make this happen and does this change my passthru status for recording taxes.

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Attorney answers 2


Any LLC will protect your assets just fine if you actually 1) treat it as a separate entity financially, 2) pay yourself as an employee, (meaning payroll withholding taxes) and 3) make it clear to those you do business with that they are doing busines with the LLC, and not you.

If you give a part of the company to your son in law, it changes the pass thru, because your son will be entitled to a portion of the profits or losses, as well as certain other rights as an owner of the company. This is not necessary for asset protection. In addition if the company has any significant value, giving him an interest in the company would result in taxable income to him.


Ms. Walter has provided you with good advice. If you still want to convert from a member managed LLC to a manager managed LLC, it will require that you file an amendment to the Certificate of Formation with the Secretary of State and pay the necessary filing fee.

DISCLAIMER - Mr. Wilson is licensed by the State of Texas and practices in the areas of general corporate and business, mergers and acquisitions and securities regulation. He is not certified by the Texas Board of Legal Specialization. The above answer is intended for educational and informational purposes and does not constitute legal advice. No attorney client relationship is created or implied by answering questions on

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