LLC Owner: Everything You Need to Know
An LLC owner has flexibility on how to run the business and what titles to give to the company officers. 3 min read
An LLC owner has flexibility on how to run the business and what titles to give to the company officers. Even so, there are some recommendations to consider when creating titles for managing members. You want to make sure you include a name that all stakeholders can understand while minimizing any risk due unintended implications for you or other member titles.
What is an LLC
A limited liability company business structure combines favorable features from both a partnership and a corporation. Like corporations, LLCs give its owners (known as members) limited liability protection, and like sole proprietorships and partnerships, it allows its members to take "pass-through profits. LLCs fall under two forms of ownership: a single-single member LLC or a multiple-member LLC.
Official Names for LLC Owners and Managers.
You have flexibility in both LLC formation and how members take part in the day-to-day business operations. With some consideration of the business size and structure, an LLC member has the flexibility comparable to a sole proprietor, partner, or passive investor.
The formal name for an LLC owner is "member." An LLC can have one or more members. LLCs run by its members are member-managed. On the contrary, A manager-managed LLC signifies that at a minimum, some members are not involved in the day-to-day business operations. If you are an LLC member who is part of the management team, then you are a "member-manager." Clients and vendors usually do not relate to the LLC.
- Some may mistake the title "member" for an employee.
- "Manager" sounds more like a mid-level employee than an owner.
- "Member-Manager" sounds like an employee who manages memberships.
Since these titles are misleading, they are not the best titles for member-managers. When choosing a title, there are two things to keep in mind. First, pick a title that lets people know you are a business authority figure. Second, choose a name that is not misleading nor confusing.
- Use “Owner” if you are the only one (or one in a few) managing the business operations.
- If you want to use member, then choose “Managing Member” because it portrays your authority.
- For a more classic way to show you are in charge, use “CEO," “President," or “Principal.”
- If you want a less formal popular approach, then choose titles like “Managing Director," “Creative Director," and “Technical Director."
Normal states do not restrict you from naming your business officers. Additionally, states like California explicitly allow the practice in their guidelines.
Titles to Avoid or Use with Caution
- Avoid using titles that include the word "Partner," such as "Managing Partner." Though an LLC can have more than one members, signifying a partnership, some may confuse it with a "partnership," which is a legal entity separate from an LLC. Since a general partnership does not protect its owners from liability, signing documents, such as a contract is confusing and may lead to personal responsibility for damages.
- While the title, "Proprietor" may have a nice ring to it, it can confuse people as well. Like a partnership, a proprietorship is a business entity that does not offer liability protection to its member. Use "Owner" instead.
- At times entrepreneurs create names such as "Lead Coordinator," because they do not want to follow traditional role names for member-managers. However, these titles do not communicate to business associates, employees, or clients that the member is a company officer. Further, do not use non-traditional titles or combine them with a traditional title, for example, "lead coordinator/CEO."
- Avoid sarcastic or humorous titles like Fearless Leader, Supreme Overlord, or Head Elf. While your customer base may relate to your humor, it may not go over too well when negotiating a multi-million-dollar contract with foreign investors. It is up to you to decide the name for the person in charge. Nonetheless, make sure the title is easy to understand, it's not misleading, and professional.
Owning a business can be fun, adventurous, and rewarding. Remember though, it is a busy and while you have flexibility with your LLC, consider your clients, customers, and partners when choosing a title for your executive team.
If you need help with LLC owners and how they can choose to manage their LLC, you can post your legal need 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, Stripe, and Twilio.