Considering forming an LLC for your start-up business? If so, one of the first decisions you must make is how the LLC should be managed - by a member (owner) or by a manager.
I asked attorney Susan Dawson this question. Here is her answer:
When filling out the forms to organize your Limited Liability Company (LLC), most states will ask if it will be member-managed or manager-managed. You may feel that because you are the owner and you are also running the company that you should pick member-managed. Makes sense right? Well you may be wrong, for many reasons. Consider this. The document you are filling out is public information. Anyone can see it. Does it really make sense to disclose to the world that you own the company? Selecting manager-managed will show you only as the LLC's manager. It keeps the actual ownership information private.
There are other benefits. Under the Internal Revenue Code, members of an LLC are not employees and therefore cannot receive a salary (LLC members receive a "guaranteed payment"). This is one of the drawbacks of an LLC, because payments to the Members are not deductible to the business, unlike a corporation, where owners can receive a salary, which is a business deduction. But the manager can receive a "manager fee". The manager-managed status allows you to put together a structure to take advantage of that fee. You can create a subchapter S corporation to act as the manager of the LLC. The LLC can then pay a manager fee to the S corporation. The payment of the fee is a tax deduction for the LLC. Plus you can take advantage of the other benefits of the corporation structure. While this structure may be more complicated than most small business need when just starting out, selecting the manager-managed structure from the start allows you to take advantage of the structure when your business is ready for it.
I agree with Susan that you should start out the way you want to go, by setting your LLC structure the way you want it when your business is fully operational.
Susan Dawson has devoted her career to representing businesses, business owners, and 
entrepreneurs. She prides herself in providing unparalleled service to her clients, quickly responding to and addressing their needs while using her extensive experience to advise clients on the best course of action for their businesses. She concentrates her practice in the areas of Business/Corporate Law, Employment Law and Commercial Real Estate/Leasing.
Waltz, Palmer & Dawson LLC (www.wpdlegal.com) was founded in 2008, creating one of the only entirely women owned law firms in the Chicagoland area. The firm uses its unique perspective to provide unparalleled legal services to its clients.
For More Information
All About Limited Liability Companies
Disclaimer: Susan Dawson's comments, and the content of this blog post and GuideSite, are for general information only and are not intended to be legal or tax advice. Each business entity has specific situations which should be discussed with your own legal or tax advisor.