Manager Managed vs Member Managed LLCs

Manager Managed vs Member Managed LLC

For some, the decision to form a Limited Liability Company (LLC) is simply an administrative task. However, for those who are running businesses that have employees or plan to make profits in the future, this decision has far-reaching consequences. 

One of the most important decisions when forming an LLC is whether it will be managed by members or managers. This post will explore both options and offer guidance on how they may apply in different situations.

Manager Managed LLC

In most cases, the LLC’s management structure is determined by its members. But there are some instances in which it may be beneficial to delegate these responsibilities to one or more other people that you trust – even if they’re not a member of your company!

Whether you plan on being an active owner and actively participate at all levels of operations within the business as well as with outside partners or whether passive owners only want information about progress without wanting any input into decision making processes, delegating responsibility can help them feel comfortable while still keeping everything running smoothly.

Managers of a manager-managed LLC are able to make decisions quickly and with less burden than if the company were member managed with many members that may block quick decision making. If your startup is large in size or has many owners, you may want to consider this type of organizational structure for these reasons!

Member Managed LLC

You might be interested to know that many people who set up an LLC choose member-management, which means all the members (owners of the LLC) share responsibility for operating their business. This approach is more common in part because most LLCs are small businesses with limited resources and they don’t need a separate management level to operate. Unlike corporations, LLCs have a streamlined organizational structure — without officers or boards of directors — so it’s often chosen by those looking for direct involvement in managing and running their own company.

If you and your LLC partners want to take charge of the business, then a member-management LLC structure is for you. For instance, if all members are actively involved in making recipes, baking goods, or hiring employees on an everyday basis – they will need member management. If you have more than one member or owner, it is recommended to have an operating agreement so that all members/owners know their roles, responsibilities, contributions, equity percentages, etc. A corporate lawyer will be able to help draft such an agreement.

Manager Managed vs Member Managed LLCs

If you are responsible for a small company and it only has one owner, then the Member-Managed LLC is generally the way to go. A single individual can make decisions about the business as necessary without having to go through other owners in order to get something done.

LLC’s are often chosen for their flexibility with management. If you want to add a manager or managers, there is no need to worry about starting from scratch as the LLC form already comes equipped with these features. 

It is a good idea to have an operating agreement as well to govern the LLC. If you fail to create your own operating agreement, then the rules of a state’s LLC laws will apply. This may not be what is best for your business so make sure that you have a written Operating Agreement before it becomes too late or asks your business lawyer to do this for you!

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