When you create a limited liability company (LLC), you have to decide on the people who can become a managing member. This is done by creating an operating agreement, which states the roles and responsibilities of each member of the LLC. An LLC can have a president or CEO, or it can be manager-managed with no LLC president or CEO, depending on the management structure stated on the LLC's operating agreement.
In most cases, the members will appoint one of their own to serve as president or CEO as per the operating agreement. However, it is also possible for the LLC to appoint a manager to oversee day-to-day business operations. Let's take a closer look at these options and see which one is right for your business.
What Is a Manager-Managed LLC?
A limited liability company can be manager-managed or member-managed LLC. A manager-managed LLC is one in which the members hire managers to oversee day-to-day operations.
This person can be an employee of the LLC or an outside party.
The members still have ultimate control over the company, but they delegate day-to-day affairs to the manager.
This is a good option for limited liability companies that are too large for member management or limited liability companies where the members don't have time to manage day-to-day operations.
Who Can Be the LLC Managers?
As already mentioned, LLC can appoint a President or CEO to manage the LLC, even with a single member LLC. But in most cases, LLCs hire managers. A manager can be someone inside the LLC or outside the company.
If you choose to have an inside manager, that person must be a member of the LLC. If you decide to have an outside manager, they don't have to be a member of the LLC, but they do need to be approved by the members.
How Do I Choose an LLC Manager?
If you have LLC operating agreement, then the person listed as the president or CEO in that document will serve as the manager of the LLC.
If the LLC does not have an operating agreement, LLC can choose a different manager.
The LLC members should agree about who will serve as the manager and their responsibilities. This decision should be documented in the operating agreement.
If there is no operating agreement, LLC defaults to member-managed LLC. In this type of LLC, all members have equal power; an LLC does not appoint a CEO or president.
Whether manager-managed or member-managed, operating agreements are essential to an LLC.
Responsibilities of Managers
The manager of an LLC is responsible for overseeing day-to-day operations such as managing employees and running legal documents. This includes ensuring that the company follows all legal requirements, hiring and firing employees, managing finances, and maintaining relationships with customers and suppliers.
The manager should also keep track of the company's goals and make sure that everyone is working towards achieving them.
The manager is not responsible for making legal decisions on behalf of the company. Those decisions should be made by a board of directors or other body created within your operating agreement.
If you are considering hiring someone as an outside manager, make sure that person has time to manage your LLC and understand their legal responsibilities before signing any contracts.
What Is the Title of the Officers of an LLC?
If the LLC members decided to appoint officers to organize their business well, it could be, as long as they stated it in their articles of organization.
The LLC officers can be the president, vice-president, secretary, and treasurer.
It's important to note that these are not management positions. The president, vice president, secretary, and treasurer have specific duties in the operating agreements.
The managing member of the LLC has full authority to make decisions about company policies and day-to-day operations, as per the operating agreement.
A managing member can also be called a managing director or chief operating officer (COO).
Do LLCs Have Directors?
A Board of directors is not required for an LLC, like the operating agreement, but it's a good idea to have one. The board of directors is responsible for making significant decisions about the company, such as who should be appointed CEO or president and what type of business the LLC should engage in.
The board of directors for LLC owners also oversees the management and makes sure that the company complies with state laws.
If you choose to have a board of directors, it should be listed in your articles of organization and operating agreement.
Does an LLC Have Classes of Stock?
An LLC does not have classes of stock. However, it can have membership units LLC owners treat similarly to stocks, depending on the operating agreement.
What Is the Maximum Number of Members in an LLC?
There is no maximum number of members in an LLC, but some states have limitations on how many members an LLC can have. For example, California allows an LLC to have up to 100 LLC members, while New York allows an LLC to have up to 20 members.
Regardless, Most states have no restrictions on ownership on a multi-member LLC, meaning members could either be individuals, corporations, or even other LLCs. However, a few types of businesses can never become LLCs, such as banks and insurance companies.
Also, most states will allow single-member LLCs, meaning it only has one business owner with an operating agreement. Check your state's requirements, as well as the federal tax regulations to learn more. If you're a foreign LLC, check for special rules before establishing one.
What Is the Proper Title for the Owner of an LLC?
The proper title for the owner of an LLC is "member." A member may be an individual or an S corporation. In some states, an LLC member may also be called manager. However, the term "manager" usually refers to someone employed by the LLC to manage its operations.
Does an LLC Have a President or CEO...
In conclusion, an LLC, traditionally, does not have a CEO or president. However, if an LLC member decides to appoint one, they can. But in most cases, an LLC member manages themselves, or they assign a manager to do it for them. President and CEOs are not necessary for LLCs.
If you are still confused about what business structure is suitable for your business, talk to a business attorney from a reputable law firm.