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When you start an LLC, you need to choose your LLC management structure.
Basically, LLC management is about:
- who is in charge of the day-to-day operations, and
- who can sign contracts for the company.
And there are 2 types of LLC management:
- Member-managed LLC
- Manager-managed LLC
This page will focus on Manager-managed LLCs.
However, to understand Manager-managed LLCs, it helps to first know what a Member-managed LLC is.
I get it: There’s so many “M” words, and these terms sound really similar. But don’t worry. We’ll help you make sense of it, and turn you into an LLC management expert by the end of this page 💪
What is a Member-managed LLC?
A Member-managed LLC means all owners (called Members) run the business and can bind the LLC in contracts and agreements.
Most people choose this option because it’s simple and everyone can help manage the LLC.
However, not all LLC owners want to run the business. And instead, they want someone else to run the business for them. In this case they may want a Manager-managed LLC.
What is a Manager-managed LLC?
A Manager-managed LLC is when the owners pick one or more Managers to run the business.
(And they can also remove them anytime if needed.)
- The LLC Managers run the business and can bind the LLC in contracts and agreements.
- The LLC Members don’t run the business, and instead take on a passive, or investor role.
Pro Tip: While it sounds like the Manager(s) has a lot of power, the LLC Members have the ultimate power and authority. They can remove or replace the Manager(s) at any time, or change the LLC management structure back to a Member-managed LLC.
This option works well if the owner(s) want to be hands-off and let someone else manage the day-to-day operations. It can also add an extra layer of privacy.
If you’re looking for some extra privacy, you may want to go with a Manager-managed LLC.
Why? Because in a Manager-managed LLC, the title “Manager” doesn’t mean you own the company (even though you may). It just means you run the day-to-day business operations.
But the title “Member” always means you are an owner of the LLC.
So, if your name is listed as a Manager (and not as a Member) in public records, people won’t know for sure if you own the LLC. This can give you a little more privacy compared to being listed as a Member, which clearly shows you are an owner.
Who can be an LLC Manager?
There are 3 types of LLC Managers:
- Internal Manager
- External Manager
- Company Manager
An Internal Manager is when an LLC Member is also an LLC Manager.
An External Manager is when the LLC Manager isn’t an owner.
A Company Manager is when the LLC is managed by another company (like another LLC or Corporation).
When do I choose my LLC’s management structure?
You choose your LLC management structure when you make your LLC Operating Agreement (the document that governs your LLC).
And some states also ask for this information when you file your Articles of Organization (the document that creates your LLC).
LLC management isn’t “set in stone”
If you’re confused or worried about making the right decision, there’s no need to stress.
LLC management structure isn’t “set it stone”.
You can easily change from Member-managed to Manager-managed (or vice) versa simply by updating your LLC Operating Agreement.
And in some states, you may need to file an Amendment to update your LLC management structure. Alternatively, this can sometimes be done via the LLC Annual Report.
In summary
In a Member-managed LLC, all owners run the business and make decisions.
In a Manager-managed LLC, only chosen Managers run the business, while the Members take a passive, investor, role.
Most LLCs are Member-managed. This is because it’s simple and lets all owners share control.
But if some owners want to be more hands-off, or you want to hire someone else to run the business, a Manager-managed LLC gives you that option.
A Manager-managed LLC can also give you a bit more privacy. That’s because if your name needs to be listed on public records, the title “Manager” doesn’t mean you own the company, but “Member” does.
Want to learn more about the differences between Member-management and Manager-management for your Limited Liability Company? Check out our guide: Member-managed vs Manager-managed LLC
Manager-managed LLC FAQs
No, an LLC Manager isn’t automatically an LLC owner.
However, they can be.
Meaning, an LLC Member (owner) can also be the Manager. But just because someone is a Manager, doesn’t mean they are a Member.
Yes, you can be both a Manager and a Member of an LLC.
This happens in a Manager-managed LLC when a Member (owner) is also a Manager.
In this scenario, their LLC title is “Managing Member”.
The first place to look is in your Articles of Organization. In some states, the LLC management structure is listed in this document.
The second place to check is in your LLC Operating Agreement.
Typically, the Operating Agreement will be titled “Member-managed LLC Operating Agreement” or “Manager-managed LLC Operating Agreement”. If not, the management structure will be listed somewhere within the document.
If you don’t like your current LLC management structure, you can change it (assuming you have the proper authority).
What if it’s not listed in my Articles of Organization and I can’t find my Operating Agreement?
If it’s not listed in your Articles of Organization and you can’t find your Operating Agreement, then you can simply make a new Operating Agreement and choose the LLC management structure that you want.
You can use this link to get a free LLC Operating Agreement template.
To change an LLC from Member-managed to Manager-managed (or vice versa), the process is pretty straightforward:
- First, the LLC Members vote to change the management structure.
- And then they memorialize this change in the LLC Operating Agreement.
If your state requires that LLC Members (or Managers) are listed in the Articles of Organization or Annual Report, then you’ll need to update their names on your next Annual Report (or by filing an Amendment).
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.
