Manager-Managed LLC vs. Member-Managed LLC

The limited liability company (LLC) structure remains a popular choice among entrepreneurs looking to start their own business. This type of business combines desirable elements of corporations with sole proprietorships. Differing from corporations, though, LLCs are not required to have Board of Directors making and voting on important decisions related to the direction of the company. Instead, the owners (called “members” in LLCs) decide important matters. 

This does not always have to be the case, though; members of an LLC might want to designate an outside hire to manage the day-to-day operations of their particular business. In this situation, it makes sense to structure the leadership of the LLC as manager-managed. This is one of two ways to structure an LLC:

  • Member-managed: the members (owners) of an LLC have the authority to make decisions for the sake of the company. Any LLC formed in Florida is, by default, a member-managed LLC. Before the state’s Revised Limited Liability Company Act took full effect in 2015, this was not the case. The thought behind this provision was that most LLCs are relatively small operations, with the members wanting to take active roles in the company. 
  • Manager-managed: the title might sound redundant, but it is actually a very important distinction. If members of an LLC wish to be only passive members for investment purposes, then bringing in someone passionate about running the day-to-day operations of the LLC makes sense. For larger LLCs, this also makes good business sense to make hierarchy clear. Generally, a manager will be appointed to run an LLC if members whose voting interests combine to be more than 50 percent vote for the manager to run the business. The manager can be but does not have to be a member in the LLC.

Conclusion

To make things easier on first-time entrepreneurs, Florida state law automatically designates LLCs as member-managed. This is due to the fact that most LLCs, especially when formed, are small operations. So, if you know you want to form your LLC as a manager-managed business, you must explicitly designate it as such in the operating agreement and Articles of Organization. 

To hear more about the pros and cons of these two types of LLC ownerships structures, check out our firm’s video where Attorney Samuel Bryant discusses this topic in-depth: https://www.youtube.com/watch?v=eE22ze2O1dg

As always, Bryant Taylor Law is here to help resolve any legal issues related to your business or to help you begin your company on the right legal footing. Call our firm at 954-282-9331 to receive a strategy session.

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