Hiring a Principal Broker as LLC Manager vs. Employee?

Question

Hi

I need to apply for a new real estate brokerage licence for my business entity that requires having a PB. The licensing form says the PB must be either manager of LLC or an employee. Could someone shed light on the pros and cons? I plan to pay the PB a % of our revenue with NO fixed salary initially until we scale.

Ghassan Jabali · Answer

Hello Ashish,

I hope you're doing well. Generally, being a Manager means the individual has vested power to direct matters of the company and is able to hire employees. Being an Employee of the company means that the individual can be seen simply as an Agent of the company. Ideally, it could be better to have the Principal Broker be an employee if their role will be more limited in your company. You may still pay them an un-fixed salary as an employee.Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

Ashish G. · Answer

Ghassan - Thank you for such a prompt response. I agree making employee gives less authority, but feels such a headache to run payroll, file taxes, workers comp etc. Could we not just hire them as manager and create an operating agreement which specifies and limits the duties as a manager of LLC?