Positions In An LLC: Everything You Need to Know
The positions in an LLC depend upon several factors, including the size of a business and the state in which a business is incorporated. 4 min read
Positions in an LLC
The positions in an LLC depend upon several factors, including the size of a business and the state in which a business is incorporated. The benefits of incorporating as an LLC include:
- Protecting ownership from personal liability in the case of lawsuits
- Low set-up costs and ease of incorporating without the need for attorneys
- The ability and flexibility to make quick decisions without the need for the approval of a board of directors.
The positions in an LLC can resemble a sole-proprietorship or partnership, with one person or only a few people calling the shots, or operate like a large corporation that depends upon a number of roles to manage the business on a day-to-day basis.
Brief Background of LLCs
The LLC has evolved into one of the most popular forms of a business structure from humble origins. In 1977, Wyoming passed legislation with the goal of creating a hybrid structure that offered the limited liability protection for ownership (hence the name) of a C corp and the pass-through tax treatment found in limited partnerships. However it was not until 1993 that the Delaware LLC Act built upon the Wyoming legislation to establish the limited liability corporation as we know it today.
LLC Organization Overview
Although every LLC can differ in size, and each state may differ in the information required to establish an LLC and the fees charged to do so, the basic organizational structure is similar. If you are considering forming an LLC, you should become familiar with the positions in an LLC. These are members, managers, officers, and registered agents.
A member is an individual who has an ownership stake in the LLC. If available at the time of incorporation, the names of every member are listed in an LLC’s articles of incorporation that is filed with the state, although many states do not require this information. A more detailed description of the roles of members is found in the LLC operating agreement that lays out how the LLC will operate, obligations of members and managers, and the distribution of profits.
A managing member is a member appointed to run the company on a daily basis. Unlike a corporation, stock in the LLC is not issued to outside investors and a member need not be an investor in the LLC to have a controlling interest. Ownership of the company is expressed either by ownership percentage or membership units, and all members have the right to vote on important matters and share in any profits the LLC may create.
A manager of an LLC is not a member, but instead an individual who plays a role in the operation of the business on a daily basis. There are generally two instances where managers play an important part in the management of an LLC. One is the case where the members of an LLC prefer to act as passive investors and remain detached from day-to-day operations. The other is when the LLC requires expertise beyond the scope of the members to run the business entirely. This is quite common in large LLCs like Chrysler or Amazon.
As a rule, however, even when managers exist in an LLC, members oversee the business on a daily basis and merely delegate responsibilities to ensure that the business is more competently managed. Often, but not always, states may require that an LLC document whether they are member-managed or manager-managed in the articles of incorporation.
It is not required that an LLC have officers, but some LLCs, particularly larger ones, find it convenient to appoint individuals to handle certain responsibilities within the company. Their titles are often similar to ones found in C-corp businesses, such as president, vice-president, and treasurer.
Regardless of title or assigned tasks, it is not necessary for officers to be members of the LLC and, depending upon whether the LLC is member-managed or manager-managed, they perform their duties under the supervision of either members or managers. Often financial institutions require that an officer be appointed by an LLC to represent the company in banking matters. However, officers do not have the authority to enter into binding agreements on behalf of the LLC and, in most cases, are only employees of the company.
A registered agent is usually only an individual registered in a state in which an LLC wishes to file articles of incorporation with the authority to receive official state communications on behalf of the LLC. Registered agents rarely have any role within an LLC beyond this responsibility.
To learn more about the positions in an LLC and how to create an article of incorporation that reflects your management goals for your LLC, you can post your legal need 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.