Member Managed LLC: Everything You Need to Know
Member-Managed LLCs are when the owners (members) of the limited liability company are able to bind the limited liability company contractually. 3 min read
2. Member or Manager Managed LLC
3. Member Managed LLC
4. Manager Managed LLC
Member Managed LLC
Member-Managed LLCs are when the owners (members) of the limited liability company are able to bind the limited liability company contractually. In addition, the members run the day-to-day business. It’s different than a manager managed limited liability company where a professional manager manages the day-to-day business.
Member or Manager Managed LLC
Either a limited liability company is managed by its members (owners) or it is managed by a professional manager. There are no laws requiring a limited liability company to be managed by its members.
“Management” of a limited liability company can be defined as having the ability to do the following:
• Make legally binding and financially significant decisions
• Open, close and manage banking relationships and accounts
• Enter into contracts and sign agreements
• Buy and sell real estate, investments, vehicles or any other financial asset
• Divest or dispose of any of the limited liability company’s assets
• Borrow money and obtain financing terms and agreements
• Hire employees, staff, contractors and consultants
In order to simplify management, only one member of a multi-member limited liability company is often designated as the manager. This is especially true if not every member wants to be involved.
An operating agreement can provide another avenue for the corporate structure. While operating agreements are not required in any state, they are highly recommended by most experienced professionals. It can clarify things for everyone involved before it becomes an issue.
Member Managed LLC
Member managed is more common because many businesses have limited resources (with which to hire management). Member-managed just means that all the members have the ability to bind the limited liability company into legal agreements. In fact, all members are agents of the limited liability company. This means that all members can bind the company. Member managed limited liability companies don’t have either officers or board of directors.
If your dream is to run your own business, then this is the way to run it.
Manager Managed LLC
Manager managed limited liability companies are managed by a professional manager. That manager has control over the activities of the business. The members do not have control over the day-to-day business. A dedicated professional manager is able to make decisions quickly, without having to ask members for their opinion or input. Limited liability companies that are manager managed relinquish authority to the manager or managers, who are legal agents of the company.
The professional manager does not have to be a member of the limited liability company, but they can be a member. If the members want to own a business but not actually manage the business, then this is the perfect structure for your limited liability company. However, management is not optional. Someone must manage the business. The legal requirements can be significant, so it’s best to get a lawyer to help walk you through the process and documentation.
If you need help with forming a new business, limited liability company, any other corporate structure or any legal need, you can post your legal need or post your job 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, Menlo Ventures, and Airbnb.