How to Manage an LLC? (Everything You Need to Know)
Managing an LLC means following its operating agreement, keeping business records and money separate, meeting state filing obligations, and making decisions through the management structure the members chose. The agreement and state law determine whether members or appointed managers handle day-to-day authority [1].
Quick Summary
- Follow the operating agreement: use its rules for authority, votes, distributions, and member or manager duties.
- Separate management from tax classification: member-managed or manager-managed is a governance choice; disregarded, partnership, or corporate treatment is a federal tax choice [2].
- Keep compliance visible: calendar state reports, tax returns, licenses, payroll, and insurance reviews.
How To Manage an LLC
The person managing the LLC should turn the operating agreement and state requirements into a short compliance calendar. Keep separate records for authority, finances, taxes, licenses, contracts, and member decisions.
1. Following the Operating Agreement
An LLC operating agreement is a working rulebook for both single-member and multi-member LLCs. Understanding how LLC rules are structured internally can help the people running the business follow consistent procedures.
Use the agreement when deciding who can act for the company, how members approve major decisions, and how distributions or member duties work.
The operating agreement can cover:
- Roles and responsibilities of the manager.
- Operational guidelines for the manager.
- The management structure of the business.
- Procedures for member meetings and voting rights.
- Members' rights and obligations within the LLC.
2. Applying for an EIN
Apply for an Employer Identification Number (EIN) through the IRS online EIN application [3] after the LLC is formed, when the business needs one. An EIN can identify the business for federal tax and employment matters; whether a bank requires one depends on the institution and the LLC's circumstances. It may also be requested when you open an LLC business bank account.
3. Keeping Personal and Business Assets Separate
Use a business account and the LLC’s legal name for company income, expenses, contracts, and invoices. Separation supports clear records, but it is not a guarantee against every claim.
4. Tracking State Filings and Company Records
A manager can delegate routine LLC paperwork, but someone should own each deadline and keep the final records. Track annual reports, amendments, approvals, and other documents filed or signed in the LLC's name.
5. Following the Allocation Rules
For an LLC taxed as a partnership, profit and loss allocations follow the operating agreement and applicable tax rules [4]. Do not assume that a member’s ownership percentage automatically controls every allocation or distribution.
6. Calendaring Reports and Tax Filings
Calendar the LLC's state reports, franchise or annual taxes, federal returns, payroll filings, licenses, and estimated-tax responsibilities. The responsible filing and payment dates depend on the LLC's classification and jurisdictions.
7. Reviewing Contracts, Insurance, and Records
- Contracts: sign in the LLC’s name and confirm the signer’s authority.
- Insurance: choose coverage for the actual risks; insurance does not replace entity formalities.
- Records: save approvals, account reconciliations, filings, and material contracts.
What Is a Manager-Managed LLC?
In a manager-managed LLC, the operating agreement or state default rule gives designated managers day-to-day authority. In a member-managed LLC, members generally manage the business directly. Read the agreement before assuming a title gives someone authority.
How to Protect Your LLC's Liability Shield
Use dedicated accounts, sign contracts for the LLC, document decisions, keep filings current, and avoid treating company property as personal property. These practices support separation; courts apply the governing state law to the facts of a dispute.
Who Are Members of an LLC & Who Manages the LLC?
Members own membership interests. Managers are the people authorized to manage the business under the operating agreement or state law; a manager may or may not be a member. An organizer or registered agent is not automatically an owner or manager.
What Does an LLC Manager Do?
An LLC manager handles the authority assigned by the operating agreement, such as approving contracts, overseeing records, and coordinating filings. A manager may be a member or an outside person; the title alone does not expand the authority granted by the company's documents.
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FAQs
Can I Manage My LLC?
Yes. A member-managed LLC can be run by its members, subject to the operating agreement and applicable state law. A manager-managed LLC can assign day-to-day authority to one or more managers.
Does an LLC Have to Have a Manager?
No. Some LLCs are member-managed, while others appoint one or more managers. Check the operating agreement and formation-state rules before assuming who has authority to act for the company.
How Many Members Should an LLC Have?
A single-member LLC is permitted in most states. Check the formation state's requirements and the operating agreement for any additional-member provisions.
References:
- https://www.sba.gov/blog/2016/2016-05/basic-information-about-operating-agreements/
- https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc
- https://www.irs.gov/businesses/small-businesses-self-employed/get-an-employer-identification-number
- https://www.irs.gov/publications/p541
