Key Takeaways

  • The manager of an LLC oversees the company’s daily operations and acts as the business’s agent with authority to make binding decisions.
  • LLCs can be member-managed (all owners manage) or manager-managed (management delegated to one or more managers).
  • In a manager-managed LLC, members can hire internal or external managers to handle business affairs while retaining ownership rights.
  • Managers have fiduciary duties, including the duty of loyalty and care, and must act in the best interest of the LLC.
  • The manager of an LLC definition includes legal authority for tasks like signing contracts, hiring employees, and managing finances.
  • Choosing between structures depends on company size, member involvement, and management skills.
  • The LLC’s operating agreement should clearly outline the manager’s authority, compensation, and decision-making scope.

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. 

Manager of an LLC Definition and Responsibilities

The manager of an LLC definition refers to the individual or group appointed to oversee the company’s operations and act as its legal representative. A manager functions much like an executive officer in a corporation, making business decisions, executing contracts, and managing financial affairs on behalf of the LLC. Their authority is derived from the LLC’s operating agreement or articles of organization.

Common responsibilities of an LLC manager include:

  • Hiring and supervising employees or contractors
  • Opening and managing bank accounts
  • Approving and executing contracts and leases
  • Overseeing the company’s budget and accounting
  • Filing required state and federal documents
  • Ensuring compliance with tax obligations and regulations

Managers also owe fiduciary duties to the company and its members. This includes a duty of loyalty—to act in the best interests of the LLC—and a duty of care, requiring them to make informed and prudent decisions. Failure to meet these obligations could result in legal liability.

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. 

Pros and Cons of Member-Managed LLCs

A member-managed LLC allows every member to share in operational control, which makes it ideal for small businesses where owners are actively involved. Advantages include simplicity, transparency, and direct oversight of daily activities. However, this structure can become cumbersome when there are many members or differing opinions. Major drawbacks include slower decision-making and potential internal disputes when unanimity is required for important actions.

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. 

Advantages and Disadvantages of Manager-Managed LLCs

A manager-managed LLC offers flexibility for companies with passive investors or large membership groups. Delegating control to designated managers allows for more efficient decision-making and attracts investors who prefer limited involvement.

Advantages include:

  • Streamlined operations with centralized management
  • Ability to attract passive or outside investors
  • Faster and more professional business decisions

Disadvantages include:

  • Non-managing members have limited authority
  • Managers may require compensation, increasing costs
  • Risk of mismanagement if the wrong person is chosen

To mitigate risks, the operating agreement should explicitly define each manager’s powers, including spending limits, authority to hire staff, and approval requirements for major financial commitments.

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. 

When to Choose a Manager-Managed Structure

Choosing a manager-managed structure makes sense when:

  • The business has many members and decision-making needs to be centralized.
  • Some members are investors who prefer not to handle daily operations.
  • The LLC requires experienced leadership with specific management expertise.
  • The company anticipates outside capital investment, where investors prefer limited liability without direct control.

For example, a real estate investment LLC with multiple investors may appoint a managing member or professional property manager to handle leases, maintenance, and tenant contracts. This structure separates ownership from management, helping maintain efficiency and clear accountability

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. 

Compensation and Legal Duties of LLC Managers

Managers may be compensated through a salary, bonuses, or profit distributions, depending on the operating agreement. If a non-member is hired, they are generally considered an employee for tax and payroll purposes. Member-managers, however, are typically treated as self-employed for tax reporting.

Legally, managers must operate within the scope of their authority and follow the LLC’s governing documents. They are required to act in good faith, avoid conflicts of interest, and not use company assets for personal gain. Many LLCs include indemnification clauses in their operating agreements to protect managers from liability when acting in the company’s best interest.

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.

Documenting and Changing Your LLC Management Structure

Your management structure should be documented in both the Articles of Organization and the Operating Agreement. These documents should specify whether your LLC is member-managed or manager-managed and outline the rights and responsibilities associated with each.

If your business grows or member participation changes, you can amend the operating agreement and state filings to switch structures. For example, a startup may begin as member-managed and later transition to a manager-managed model when outside investors come aboard. Properly updating your filings ensures compliance with state law and avoids internal disputes

Frequently Asked Questions

1. What is the manager of an LLC definition?

A manager of an LLC is the person or group responsible for running the company’s operations and making legal and financial decisions on behalf of the LLC.

2. Can an LLC have multiple managers?

Yes. An LLC may appoint more than one manager to divide responsibilities, such as finance, operations, or marketing.

3. Can a non-member be a manager of an LLC?

Yes. A manager-managed LLC can hire an external professional to oversee operations if the members prefer to remain passive investors.

4. Do LLC managers have fiduciary duties?

Absolutely. Managers owe duties of loyalty and care to act in good faith and in the best interests of the LLC and its members.

5. Can a member-managed LLC switch to manager-managed?

Yes. The change can be made by amending the operating agreement and filing an update with the state to reflect the new management structure.

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