Key Takeaways

  • An LLC principal is the primary individual authorized to act on behalf of the LLC, often an owner or top executive, but may also be a non-owner if designated.
  • The principal is distinct from the principal office—the latter is a physical location, while the former is a role with legal and strategic authority.
  • Government agencies require the principal’s information for compliance, tax correspondence, and fraud prevention.
  • The principal can change through formal updates to state records, IRS filings, and the LLC’s operating agreement.
  • Responsibilities range from signing key documents to guiding business strategy, maintaining fiduciary duties, and managing risk.
  • Requirements to serve as a principal include meeting IRS eligibility rules and any applicable licensing standards.
  • Titles for principals can vary (e.g., president, CEO, managing member) and should reflect authority without misleading stakeholders.

An LLC principal or principal member, also called the responsible party, is a person who has been authorized by the LLC to act on its behalf in legal and tax matters. Such a person usually has financial and decision-making powers on behalf of the LLC.

For multi-member LLCs, the principal is normally the member with the biggest ownership interest in the LLC. Other multi-member LLCs can designate one of the members as the principal. For single-member LLCs, the owner is generally the principal while the top manager of a manager-managed LLC may be the principal of that LLC.

About LLCs

An LLC is an entity type formed at the state level by filing a document called the "articles of organization." LLCs are flow-through businesses, meaning that any profits or losses of those businesses are redirected to the owners. The LLC does not pay corporate tax. Rather, it is the individual owners of the business who pay taxes on their share of income from the LLC.  

LLCs are, however, obligated to withhold and forward payroll taxes from their employees or employee-owners. The IRS and state tax authorities need a way to uniquely identify and communicate with LLCs. The IRS thus assigns a nine-digit Employer Identification Number to all entities. This number acts as a unique identifier for the LLC.

For multi-member businesses, the IRS also requires that those businesses choose a person who will correspond with the IRS on behalf of the other members.

Principal vs. Principal Office

While the principal of an LLC refers to a person, the principal office is the official physical address where the business’s primary activities or records are located.

  • Principal – An individual with authority to act for the LLC, often an owner or senior officer.
  • Principal Office – The main business location listed in state records. It can be different from a registered agent’s address and may be in a different state than where the LLC is formed.
    Understanding this distinction is important when completing state filings, as many forms require both the principal’s name and the principal office address.

Common Titles for an LLC Principal

An LLC principal may hold a variety of titles depending on the company’s size, structure, and culture. Common options include:

  • Managing Member – Often used in member-managed LLCs where the principal is also an owner actively involved in operations.
  • President – Conveys top executive authority, typically in larger or more formal LLCs.
  • Chief Executive Officer (CEO) – May be used if the LLC’s structure resembles a corporation’s, signaling primary decision-making power.
  • General Manager – Highlights operational leadership rather than ownership status.
  • Principal Owner – Emphasizes both the ownership stake and decision-making authority.

Titles should align with the individual’s role and responsibilities, and they should not mislead clients, vendors, or regulators about the person’s authority.

Why the Government Needs to Know the Principal of Your LLC

On some federal and state governments forms, the principal of an LLC normally refers to a member with authority and financial say regarding the affairs of the LLC. The name of the principal member of the LLC may be required on such forms, such as the Employer Identification Number application or Form SS-4 and the Change of Address or Responsible Party-Business or Form 8822-B.

The principal is normally the person with whom the tax authorities correspond about matters pertaining to the LLC. In multi-member businesses, the principal is the point person with whom authorities can communicate about the business.

Legal and Tax Importance of Identifying the Principal

Federal and state agencies require accurate principal information for multiple reasons:

  • Compliance and Transparency: The principal is the official point of contact for government notices, audits, and compliance checks.
  • Tax Reporting: The IRS uses the principal’s Social Security Number or Individual Taxpayer Identification Number for record-keeping and correspondence.
  • Fraud Prevention: Having a named principal helps prevent unauthorized individuals from making binding decisions for the LLC.
    Failure to keep this information current can lead to missed deadlines, penalties, or even administrative dissolution of the LLC.

How to Identify the Principal Member of the LLC

Although it is normally assumed that the member with the biggest financial stake in the LLC is the principal, to avoid confusion, it is a good practice for each LLC to choose its principal regardless of financial stake. This can ideally be done before drafting an operating agreement so that the principal member can be specified in the agreement. This practice is especially useful in manager-managed LLCs or LLCs whose members have an equal number of shares.

In the event of the death or incapacitation of the principal of the LLC, the IRS should be notified about the change of the principal of the business using Form 8822-B, Change of Address or Responsible Party - Business. 

Changing the Principal of an LLC

If your LLC changes its principal—for example, due to ownership transfer, restructuring, or resignation—you must update both state and IRS records:

  1. State Records: Most states require an amendment to the Articles of Organization or an annual report update to change the listed principal.
  2. IRS Records: File Form 8822-B within 60 days of the change.
  3. Operating Agreement Update: Amend your LLC’s operating agreement to reflect the new principal’s authority and responsibilities.
    Keeping records updated ensures continuity in legal authority and prevents gaps in communication.

Requirements for a Person to Be a Principal of an LLC

The IRS sets qualifications for a principal of any entity. These are:

  • The principal must be at least 18 years old.
  • The principal must be a U.S. resident or legal permanent resident of the United States.
  • The person must submit fingerprints to the IRS.
  • The principal must meet all local and state licensing and bonding requirements for the preparation of tax returns.
  • If the person is part of a professional body, they must have a valid license and be in good standing with the body.

Additional Considerations When Selecting an LLC Principal

When designating an LLC principal, consider factors beyond the legal requirements:

  • Experience and Expertise – A principal should have sufficient industry knowledge to guide strategic and operational decisions.
  • Availability – The role requires timely responses to government agencies, tax authorities, and business partners.
  • Reputation and Credibility – A principal’s professional history can influence investor confidence and brand trust.
  • Succession Planning – Identify backups or succession protocols to avoid operational disruption if the principal is unavailable.
  • Communication Skills – Since the principal often serves as the primary contact, strong interpersonal and negotiation skills are valuable.

These considerations help ensure that the appointed principal can fulfill both the legal and practical demands of the role.

Can a Non-Owner Be the Principal?

While principals are often owners, an LLC can designate a non-owner—such as an executive manager or CEO—as its principal. This is common when:

  • The LLC has passive investors who prefer professional management.
  • The designated principal has industry expertise or operational control.
  • The owners are not U.S. residents and need a U.S.-based representative.
    In these cases, the principal still must meet IRS eligibility requirements and be formally authorized in the LLC’s operating agreement.

Responsibilities of the LLC's Principal

The principal of an LLC may have several responsibilities, including:

  • Signing documents: Some LLC tax documents must be signed by the LLC's principal. These documents include annual filings and tax filings.
  • Receiving correspondence: The principal is the point person who will receive mail on behalf of the LLC. It is the principal's responsibility to forward the mail to another member or to tell them about the correspondence.
  • Handling client relationships: The principal is normally the face of the LLC and is responsible for handling business-customer relationships. They bridge the gap between the company and lenders, tax authorities, customers, and suppliers.

Potential Liabilities of an LLC Principal

While LLCs protect owners from personal liability for company debts, principals may still face certain personal exposures, including:

  • Breach of Fiduciary Duty – If the principal acts against the best interests of the LLC or its members.
  • Personal Guarantees – If the principal personally guarantees business loans or leases.
  • Regulatory Violations – If the principal is directly responsible for non-compliance with industry regulations.
  • Fraud or Misrepresentation – Actions taken by the principal that intentionally mislead stakeholders can lead to personal liability.

Understanding these risks is important for anyone accepting the role of LLC principal, and many principals mitigate them through indemnification clauses in the operating agreement or appropriate insurance coverage.

Fiduciary and Strategic Duties of a Principal

Beyond administrative tasks, principals often have broader responsibilities, including:

  • Fiduciary Duty: Acting in the best interest of the LLC and its members, avoiding conflicts of interest.
  • Strategic Decision-Making: Guiding the business’s vision, major investments, and partnerships.
  • Risk Management: Ensuring compliance with laws, managing financial risks, and protecting company assets.
  • Public Representation: Serving as the face of the company in high-level negotiations and industry events.
    These responsibilities can vary depending on the LLC’s size, industry, and governance structure.

Frequently Asked Questions

  1. Is the LLC principal always the owner?
    No. The principal can be a non-owner if the LLC’s operating agreement allows and the person meets eligibility requirements.
  2. Can an LLC have multiple principals?
    Yes. Internally, an LLC can designate multiple principals, though the IRS requires only one responsible party for tax purposes.
  3. How should I choose the right title for my LLC principal?
    Select a title that reflects the role’s authority and responsibilities without misleading stakeholders.
  4. What happens if the LLC principal changes?
    You must update state business records, file IRS Form 8822-B, and revise your operating agreement.
  5. Can the principal be held personally liable for LLC debts?
    Generally no, but they may be personally liable for breaches of fiduciary duty, fraud, or personal guarantees.

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