Centralized
Management and Transferability
of Interests
Centralized
Management
A
business organization
has centralized management
when one or more persons
have exclusive authority
to manage its day-to-day
conduct. The majority
of Limited Liability
Company’s lack corporate
characteristics of
centralized management
because most Limited
Liability Company statutes
in most states provide
that members manage
the company directly,
and Limited Liability
Companies that do not
have separate managers
lack the corporate
characteristic of centralized
management. But it
some states it’s required
that Limited Liability
Companies have one
or more managers to
manage the company.
If the operating agreement
of a Limited Liability
Company or articles
of organization require
that each and every
member to be a manager,
then in all likelihood
the Limited Liability
Company lacks corporate
characteristics of
centralized management.
On the other hand,
if members designate
nonmembers to manage
the company or designate
member-managers who
do not own a substantial
portion of the Limited
Liability Company’s
membership interests, then the Limited Liability Company may possess the corporate
characteristic of centralized
management.
Transferability
of Interests
A
business form possesses
free transferability
of interests when one
of its owners has the
essential power to
substitute someone
else as a new owner
of the business. For
example, the majority
of corporate shareholders
may sell their shares
freely thereby transferring
their ownership interest
to another person,
without the consent
of the other shareholders.
But, a Limited Liability
Company member may
not substitute another
person as a new member
unless the existing
members agree to the
substitution. Typically,
in a Limited Liability
Company, a member has
the power only to assign
his economic rights.
Therefore, Limited
Liability Company members
lack the ability to
freely transfer substantial
amounts of their interest
in the company.
If
you would like more
information regarding
asset protection, trusts,
family limited partnerships
or the subject of this
article please call
or email our office.
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