For most, LLCs are already confusing enough.
Now throw in a bunch words that start with “M”, sound really similar, and are challenging to understand, and great… now you’re scratching your head thinking, “Holy crap! This LLC stuff is confusing!”
We understand. It certainly can be a lot to digest, but let’s dive in and define all these “M” words and figure out what they all mean.
Before we define LLC titles, like Member, Managing Member, and Manager, we first need to understand the differences between a Member-Managed LLC and a Manager-Managed LLC.
FYI: To make this article a little easier to understand, we’re going to underline some words so your brain doesn’t think it’s reading “Member” when it says “Manager” and vice a versa.
LLC Management (Member-managed vs. Manager-managed)
In the majority of states, you are required to disclose how your LLC will be “managed“.
Will it be managed by the all the Members, will it be managed by some of the Members, or will it be managed by hiring outside Managers?
– If an LLC is managed by all the Members, this is called a “Member-Managed LLC”.
– If an LLC is managed by some of the Members (but not all of the Members), this is called a “Manager-Managed LLC” (with internal management).
– If an LLC is managed by people hired specifically to run the company, but they do not own the LLC, this is also also called a “Manager-Managed LLC” (with external management).
Additional reading: For more information on Member-Managed LLCs vs Manager-Managed LLCs, please see this article.
Reminder: Even if the state where you are forming an LLC does not require you to disclose your LLC’s style of management, you will still need to choose your LLC’s style of management in order to complete your LLC’s Operating Agreement.
Northwest ($39 + state fee) or LegalZoom ($149 + state fee)
Members, Managing Members, and Managers
Let’s define the the different titles that can be used for people involved in an LLC.
An LLC Member is an owner of an LLC.
An LLC Managing Member is someone who both owns the LLC, as well as runs the day to day operations, makes business decisions, and has the authority to bind the LLC into contracts and agreements.
In short, a Managing Member is both a Member and a Manager.
An LLC Manager is a person (or persons) responsible for running the day to day operations, makes business decisions, and has the authority to bind the LLC into contracts and agreements.
There are 2 types of LLC Managers: Internal Managers and External Managers.
– An Internal Manager is someone who runs the LLC as well as owns it.
– An External Manager is someone who runs the LLC, but does not own it.
Which Title Should I Use?
Tip: This stuff can be confusing and often sounds like a riddle (the words all sound similar). We recommend reading the following section (and maybe even the whole article) twice.
• If you own (some or all of) the LLC and the LLC is Member-Managed, you have the choice of using the title “Member” or “Managing Member”. The term “Managing Member” is more specific, as it states that you both own and manage the company.
• If you own some of the LLC and the LLC is Manager-Managed by other Members besides yourself, you must use the title “Member”. You cannot use the title “Managing Member” or “Manager”.
• If you own (some or all of) the LLC and LLC is Manager-Managed by an external person or persons, or a 3rd party, you also must use the title “Member”. You cannot use the title “Managing Member” or “Manager”.
• If you own (some or all of) the LLC and LLC is Manager-Managed by you, you can use the “Manager” or “Managing Member”.
Most LLCs are Member-Managed (and therefore run by Managing Members)
Most of our readers are small business owners, where they either own their companies 100%, or they have a business partner or two (and they share ownership).
In the majority of these cases, the LLC Members all want to take part in running the day to day operating and making business decisions.
In this case, the LLC has a Member-Managed style of management and all the Members can use the title “Managing Member”. This is the simplest structure and the simplest form of management, and again, this is the most popular.
The world of LLCs and their style of management can get quite complex, and depending on who owns your LLC and how it is managed will dictate the title that you use.
Again, most people own their LLCs outright (or with partners) and are Member-Managed, so “Managing Member” is the most common, and the most appropriate LLC title to use for most people.
On the other hand, there are times when not all LLC owners want to manage a company. In some cases, some of the Members run the business while other Members don’t, and in other cases, none of the LLC Members run the business. In both of these examples, the Members just use the title “Member”.
We hope that helps you further understand LLC titles and management structures.