b'prongtest(calledtheHowey4-ProngTest)includingthefollowing elements: An investment of money In a common enterprise With the expectation of profit and Based solely on the efforts of the promoter or a third party. Here is the plain English translation: If you take control of an investors money, and the investor is relying on you to generate a profit for them, you have created a security. And even simpler: If you have passive investors, you are selling securities. How does this translate to interests in a limited liability company? Whenformingalimitedliabilitycompany,yougenerallyhavetwo choices: Will it be managed by the members or managed by a manager? In some states, you are required to make this election when filing the formation documents with their secretary of state or other business formation agency. A member-managed limited liability company, in which all members participate in management of the company, is not treated as an investment contract, as it does not meet the fourth prong of the Howey Test, primarily because all members are presumed to be managing members and each is relying on their own efforts to generate a profit. Conversely,formingamanager-managedlimitedliabilitycompany, wherethereareoneormoremanagersandpassiveinvestor-members, always creates a security because the passive investors will be dependent on 6'