Can a LLC Have a CEO: Everything You Need to Know
Can a LLC have a CEO? Yes, limited liability companies (LLC) have it well within their rights to appoint a CEO or any other corporate officer they desire. 3 min read
Can a LLC have a CEO? Yes, limited liability companies (LLC) have it well within their rights to appoint a CEO or any other corporate officer they desire. However, unlike corporations, LLCs are not required to have a CEO.
Management of an LLC
Where other business entities require strict management structures, an LLC is very flexible, and management of your company depends mostly on your preferences. For example, corporations are legally required to choose officers, such as a president, and to elect a board of directors. No such requirements apply to LLCs.
When establishing your LLC, you can choose to structure your company so that it functions like a corporation, meaning you can name a CEO and any other officers that you desire. However, you can also pick a less formal management structure for your LLC, such as allowing members to handle daily operations.
If you decide that you want to appoint a president or CEO for your LLC, you should be sure that the person you choose has the skills necessary for the job, as you are giving them the power to organize and control your company, including binding the LLC into contracts.
Many LLCs are run by outside managers, with the members having very little input into the operation of the business. When forming your LLC, you likely indicated whether your company would be member-managed or manager-managed. Managers who are responsible for day-to-day company operations are known as member-managers. In general, states provide a great deal of flexibility when it comes to management of LLCs.
Typically, an LLC functions as a partnership, which means every member has a say on how the company is run and is entitled to an equal share of the profits.
If you decide a manager-managed LLC is the better option, you can hire a single manager or a group of managers for your company.
What is a Member?
Before you can choose the right management structure, you need to learn a little bit about LLC ownership. Any person who is involved in the forming of an LLC and possesses an ownership interest in the company is referred to as a member. LLCs are able to have as many members as they choose, with some LLCs having multiple members and others having a single member. If you believe your members are capable, then a member-managed LLC is usually the best choice.
The state where your LLC is located largely determines the structure of your business. However, regardless of the state, it is common for small LLCs to have a limited number of members. If your LLC has a single member, that member can be named president, CEO, or any other title. This is because an LLC needs at least one person directing operations. Otherwise, the company has limited opportunities for success. Single-member LLCs allow for the company's sole member to be the leader of the organization, and this person can use any title that best describes their duty.
Multiple-member LLCs need a more detailed structure, which is why they typically do not have an organizational leader. It is necessary for LLCs to have an operating agreement that clearly defines member roles, including member responsibilities within the company.
If your LLC has multiple members, your operating agreement should include the following:
- A description of how the company will be managed.
- An indication of who has the right to sign contracts on behalf of the LLC.
- A method for distributing profits and losses, as well as steps for LLC dissolution.
Choosing a corporate structure can be beneficial when assigning member duties because it allows you to appoint corporate officers, including a CEO, whose responsibilities are defined by their title. If you choose to use corporate officers in your LLC, your members need to agree on all appointments.
Your LLC's CEO is the person with the most authority in your company, and they are responsible for directing company operations and instituting goals for the success of the business. When an LLC chooses to structure as a corporation, it needs a board of directors to develop goals for the business that the CEO then implements. The CEO is also required to report to the board.
If you need help structuring your limited liability company or appointing a CEO, you can post your legal needs on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.