Manager of LLC: Everything You Need to Know
A manager of LLC is an individual, group of people, or another business entity that handles the daily business functions of a limited liability company (LLC).3 min read
2. Who Are the LLC Members?
3. What Is a Managing Member?
4. Member Classes
5. Liability of a Managing Member
Updated Ocotber 27,2020:
Management of an LLC
If you are starting a business and have come to the conclusion that an LLC is the right business structure for you, there are some additional decisions you'll need to make. One of these decisions is how your LLC will be managed. You have two options:
LLCs provide the same liability protection that corporations do, but their management structure is very different. If you start a corporation, you'll be required to form a board of directors and choose officers to run the company. Owners of LLCs have tons of freedom when it comes to deciding exactly how they want to run their businesses.
A member-managed LLC has its day-to-day operations handled by its members. Manager-managed LLCs are managed by either hired or appointed managers. LLC managers in a manager-managed structure can be members of the LLC, or third-party individuals or companies. A small group of members may choose to run the business or hire an outside company.
Who Are the LLC Members?
The owners of an LLC are called its members, much like how the owners of a corporation are called shareholders. LLC members can own any percentage of the business.
Most states allow LLCs to have any number of members. A single-member LLC has only one member, and a multi-member LLC has any number above that. The only time the number of members allowed in an LLC is limited is when the business owners elect S corp status for the LLC with the Internal Revenue Service (IRS). S corps are not allowed to have more than 100 members.
What Is a Managing Member?
Members of an LLC acting as managers for the business are representatives or agents of the company. These managers have the power to form contracts for the business. The business's operating agreement should spell out the rights and responsibilities of any and all managing members clearly.
A managing member position within an LLC will usually have the authority to:
- Make business decisions regarding daily company operations, like firing or hiring employees or independent contractors
- Enter into binding agreements on behalf of the LLC, such as contractor agreements or property sales
- Make legal decisions
- Open or close business bank accounts and credit cards
- Buy or sell property
A thorough operating agreement should clarify the extent of a managing member's authority. For instance, is a managing member allowed to fire an employee without the consent of the rest of the members? You'll want to outline which decisions require group approval and which may be made solely by the managing member or members.
Some LLCs may offer different classes of membership for owners. One level of members might have more management responsibilities than another. Member classes can also differ on their percentages of profit distribution.
All LLCs are required to have at least one member. Single-member LLCs will have only one class of membership and basic operating agreements. Multi-member LLCs can get more complicated with differing levels of membership, managing and non-managing members, and third-party management, if desired.
Another option for LLC management structure is having the members form groups or classes for decision-making purposes. Each group may elect a representative to make decisions on behalf of the group.
Liability of a Managing Member
No matter the particular type of management structure chosen by the LLC, all managing individuals are required to act in the best interest of the company.
LLCs are known for the protection they offer their owners from personal liabilities. This same protection is offered to all members, whether they are acting as managers or not.
If any member acts unlawfully while making decisions on behalf of the LLC, they forfeit their liability protection. Managing members will need to act carefully to be sure that they are working within the laws of the state and the bounds of their operating agreement. Failure to do so could result in opening themselves up to personal liability.
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