Owners of an LLC are called members. Most states do not restrict ownership, so members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single-member” LLCs, those having only one owner.
A member-managed LLC is a business entity in which all members participate in the decision-making process. Each member has an equal right to manage the LLC’s business, unless otherwise stated in the operating agreement.
Member-managed LLC
A member-managed LLC is a business entity in which all members participate in the decision-making process. Each member has an equal right to manage the LLC’s business, unless otherwise stated in the operating agreement. If a dispute arises, the vote of a majority generally rules. Although certain actions can require unanimous consent.
If the members consent, an LLC may be set up with different classes of members with one class having greater or different management rights than others.
While each situation is unique, the following scenarios may prompt you to choose that your LLC be managed by its members:
Manager-managed LLC
As stated above, members don’t participate in the day-to-day management of a manager-managed LLC. Instead, managers make these business decisions. It’s important to note that a member can also act as a manager, just as a shareholder can be one of a corporation’s directors. Alternatively, the manager may be an outsider.
In a manager-managed LLC, the business is managed like a corporation, with a central governing body that deliberates and acts on the LLC’s behalf – without first obtaining the members’ consent. The managers may run daily operations, or they may appoint officers to do that.
The number of managers that an LLC chooses should be listed in the operating agreement as well as the qualifications of those managers.
A manager-managed LLC can make sense for your business if certain LLC members don’t intend to take part in decision making (typically family members or outside investors). If the members choose this option, the members will not have a say in ordinary business decisions designed to help achieve your business’ goals.
