NO! Doing so will advertise your lack of knowledge about corporate structures to the world. While many of your peers may be equally uninformed (since they are all using that title and think it’s OK), you can elevate yourself above the crowd by knowing and correctly applying the right terminology to your LLC. Each state has its own LLC Act that provides definitions of the terms associated with LLCs in its jurisdiction. All are pretty standard and pretty much follow the same guidelines.
Here’s a primer:
There are two types of limited liability companies (LLCs): “Member-Managed” or “Manager-Managed.” Most states will require that you make this election when you form your LLC. You may use both types of LLCs in your syndication business, but each has a specific application.
There are different legal names for the participants in an LLC:
“Manager” —This is the natural person or persons, or legal entity that will manage the business of your LLC. If you select Manager-Managed, the state will require that you provide the name and address of the Manager or Managers. The Manager may be one or more individuals, or it may be other legal entities. Managers do not need to be Members of the company, but they could also be Members in some instances. There may be tax reasons you don’t want them to become Members, as the Manager’s earnings may be taxed differently than the earnings of the Members.
“Member” —These are the people who make capital contributions (cash investments) or non-capital contributions in the form of services. Members are present in both Member-Managed and Manager-Managed LLCs.
If your LLC is Manager-Managed the Members will not have day-to-day control over operations, as those duties will be reserved to the Manager, but they may have limited voting rights over certain major decisions.
If your LLC is Member-Managed, by law, all of the Members will be considered to be Managing Members, which means all of them are actively involved in the management of the LLC’s business, and each Member could, technically, use the title Managing Member. In practice, Member-Managed LLCs may designate one or more of the Members to act as the Managing Member.
Back to whether you can call yourself a “Managing Partner.” As you can see, there are no “Partners” in an LLC. The term “Partners” arises in two instances:
When you form a “General Partnership” — Two individuals or legal entities (“Persons”) that join together to achieve a common goal may be called a General Partnership, and both are typically actively involved in promoting the common purpose. Legally, if two Persons created a “general partnership agreement,” each of them would remain liable for each other’s acts. To circumvent this, the Persons wishing to become general partners will typically form a Member-Managed LLC and each of them will become “members” of the LLC, as the members of an LLC each enjoys limited liability up to the extent of their investment in the LLC. But even this would not be an appropriate place to use the term Managing Partner as the correct name for the members of a Member-managed LLC.
The other place the term Partner would be appropriate is if you formed a “Limited Partnership.” In a Limited Partnership, there is a “General Partner” and “Limited Partners.” Note that it would not be common to call a “General Partner” the Managing Partner, although that term could be used if there were more than one General Partner and one of them were to take the lead role in managing the entity.
So, what should you call yourself if you manage an LLC?
Admittedly, the term “Manager” is kind of boring. But the beauty of LLCs is that you get to write your own “Operating Agreement” or “Company Agreement” as defined by the state LLC Act where the company was formed. In your agreement, you can decide to use whatever titles you want. You could use a traditional officer or director name, such as President, Vice President, Treasurer, or Secretary, or CEO, CFO, COO, etc. Or you could follow the legal name prescribed by your LLC Act, which would either be Manager (if your LLC is Manager-Managed) or Member or Managing Member (if your LLC is Member-Managed).
Granted, none of these names is going to inspire anyone to ask “what do you do” if they see it on your business card. It’s time to think outside the box. You should think about branding yourself in all aspects of your business, starting with the name of your company, your title, and any taglines you put on your business card that help people remember what you do long after your first meeting. When choosing a title for yourself, instead of choosing something that is boring and perhaps legally incorrect, such as “Managing Partner,” why not pick something imaginative such as “Chief Acquisitions Officer,” “Director of Investor Relations,” “Real Estate Fund Manager”? My friend Susan Lassiter Lyons actually uses the title “Chief Fun Officer”! Now, there’s a new spin on the meaning of CFO.
Bottom line: Think of something more creative than “Managing Partner,” which is probably legally incorrect and not very imaginative, and instead give yourself a title that invites further inquiry when you hand someone your business card — preferably one that they will remember for a long time to come.
We get potential clients who reach out to us every week who want to start a fund. While we could simply take their money and set them up with fund offering documents, we actually talk a lot of people out of doing a fund. Why? Because they don’t have the necessary...