Manager Of An LLC: Everything You Need to Know
The manager of an LLC is responsible for the day-to-day operations of a limited liability company (LLC). The owners of an LLC are usually called members. 3 min read
2. What Is a Member-Managed LLC?
3. What Is a Manager-Managed LLC?
4. Reasons for and Against Manager-Management
5. LLC Managers: Are They Employees?
6. When to Select Your LLC's Management
What Is a Manager of an LLC?
The manager of an LLC is responsible for the day-to-day operations of a limited liability company (LLC). The owners of an LLC are usually called members. LLCs can either be single-member or multi-member, depending on how many people own the company.
Like any other business, LLCs use managers to help run the company. While some LLCs choose to have a single manager, others will employ a team of managers. They will act similarly to a corporation's board of directors. In some LLCs, the members will also act as managers. In other LLCs, a professional manager will be hired to run the company. There are no state laws requiring LLC members to manage their own company.
What Is a Member-Managed LLC?
In a member-managed LLC, all members of the company are able to enter into agreements and contracts. They can also make business decisions and participate in the company's daily operations. Every member in a member-managed LLC will take part in the decision-making process. While all members can make company decisions, they must have a majority vote before they can enter into loan agreements and contracts.
What Is a Manager-Managed LLC?
When LLC members decide to hire an individual manager or a management team, this is known as a manager-managed LLC. In this scenario, only managers can enter the LLC into contracts and control day-to-day company operations. In a manager-managed LLC, the company can either hire an outside manager or appoint one or more of the members as a manager.
Most states require LLCs to explain their management structure in their Articles of Organization, which is also known as a Certificate of Formation or a Certificate of Organization. How you manage your LLC will also determine the type of Operating Agreement you will use for your company.
Reasons for and Against Manager-Management
Limited liability corporations typically choose a manager for two reasons:
- The LLC has passive members.
- The company is too large for member-management.
Passive LLC members are individuals listed as company members and who likely invested in the LLC, but take no part in the company's decision-making process. Because they have no say in the company's decisions, passive members have significantly less liability than do other LLC members. Having one or more managers makes sense when a company has multiple passive members.
If the company is very large, gathering members together frequently to make business decisions can be difficult. With managers in place, members of the company can focus on their areas of expertise and the work about which they are the most passionate. A large LLC's operations are much more complex than those of smaller companies. Managing these LLCs takes a great deal of time and effort, which is why hiring managers can be a good idea.
When hiring a manager for your LLC, remember that he or she will have financial responsibilities in your company, as well as the power to make business decisions on behalf of the LLC. If you're wary about allowing your manager to make decisions for your company, reserve these rights and responsibilities for members only.
LLC Managers: Are They Employees?
In most circumstances, the members of your LLC are considered owners, not employees. However, if one of the members of your company also acts as a manager, it's possible for that individual to receive employee compensation.
If a member is employed as a manager, this role will be separate from his or her role as an owner of the company. Define this distinction in either your company's operating agreement or in the employment agreement when hiring a company member as a manager.
A professional manager will always be considered an employee. Whether you hire a professional manager or allow a member to handle management duties, you should be sure to provide them with a decent salary and withhold payroll taxes.
When to Select Your LLC's Management
The best time to choose a manager for your LLC is before company operations have begun. In your operating agreement, you should outline the management of your LLC and include rules for making business decisions.
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