Members, managers, and managing members: Who's on first base in your LLC?

March 19, 2019

first-base-in-llc

The terminology for limited liability companies can be confusing. For instance: who are the members, managers and managing members?

All of the owners of an LLC are its members, similar to stockholders in a corporation.

There are two different possible management structures for LLCs: A manager managed LLC or a member managed LLC.

Manager-managed LLC

A manager is a person (or persons) chosen by the members to manage the LLC. This role is similar to a director of a corporation. Normally, the manger runs the day-to-day operations, makes business decisions, and has the authority to bind the LLC in contracts and agreements. LLC owners often choose to be manager managed when most of the members will not be active in running the business or the members do not want their names listed on publicly filed company documents. Another benefit is if the company admits new members at a later date, the Certificate of Formation filed with the Secretary of State’s office does not need to be updated.

Member-managed LLC

In a member-managed LLC, the managing members of the LLC are responsible for managing the company. In a member-managed LLC, the owners or members are called “managing members” since they assume the role of a manager. If there is more than one managing member, it is important to understand the voting requirements necessary for the members to approve business decisions. The names of the members of the LLC are listed in the Certificate of Formation filed with the Secretary of State. If additional members are admitted to the LLC at a later date, the company must update the names of the members listed in the Certificate of Formation.

How is my LLC organized?

Check the Certificate of Formation for your LLC, which was filed with the Secretary of State’s when the LLC was organized. The governing authority provision of the Certificate of Formation either states (i) that the LLC will be managed by managers and lists the names of the managers, or (ii) that the LLC will not have managers and lists the names of the managing members.

What is my title? How do I sign my LLC documents?

If you are an owner of an LLC, you are a member, regardless of how the LLC is managed.

If you are an owner of an LLC which is manager-managed and:

  • one or more people are listed as the manager(s) but not you, you are only a member. You cannot use the title “manager” or “managing member.”

  • you are designated as a manager, you should use the title “manager.” You are also a member.

If you are an owner of an LLC which is member managed:

  • You are a member or managing member. The term “managing member” is more specific, as it states that you both own and manage the company.

  • If you are the only owner, you are the sole member or the sole managing member.

Business legal issues are complex. Business owners should consult with their legal and tax advisers on such matters. For more information, please contact Kathy Tremmel at Tremmel Law, PLLC at (512) 539-0317 or kathy@tremmellaw.com.

Topics: Business Operations, Business Best Practices, Legal, Strategic Planning

Kathy Tremmel

Tremmel Law

Kathy Tremmel has significant experience both as a business attorney and corporate executive. Her career spans both legal practice and business management and she opened her own solo law practice in January 2010. In additional to running her own practice, she also is of Counsel with Selman, Munser & Lerner, which is a business transaction law firm in Austin, Texas. Ms. Tremmel has more than 10 years’ experience as a business attorney, providing transactional legal services to a diverse client base, from start-up ventures to well established companies. She helps companies with all their contracts, including customer agreements, non-compete agreements, employment agreements, buy-sell agreements, loans, and leases, helps people set up new businesses, and represents buyers and sellers of businesses. In addition, Ms. Tremmel has 10 years of management experience working with start-up companies. As VP of Operations at Tusker Group, an international litigation support company, Ms. Tremmel led international teams, managed production and quality issues, handled price negotiations, worked closely with clients to determine the scope of their projects, provided project management services, and developed, implemented and documented best practices for processing and training. Ms. Tremmel earned a Doctor of Jurisprudence from the University of Colorado School of Law and a Bachelor of Arts from Dartmouth College. She is a Texas licensed attorney and a certified Project Management Professional.
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