Does an LLC Have to Have a President or CEO? (The Answer)
When you create a Limited Liability Company (LLC), you have to decide whether to elect or appoint a president or CEO.
A 2024 survey by the National Association of Self-Employed (NASE) suggests that 58% of LLCs in the US operate as member-managed.
As an experienced business consultant and legal advisor with over a decade of practice, I have helped clients across several states regarding their limited liability companies.
After extensive research and collaboration with our team of legal experts, I will provide you with a comprehensive guide to help you decide whether your LLC needs to have a president or CEO.
Quick Summary
- LLCs are not legally required to have a president or CEO, but members can choose to appoint one to oversee operations and guide the company toward its goals.
- The decision to appoint a president or CEO is typically outlined in the LLC's operating agreement, which acts as a binding contract among members.
- A 2024 survey by the National Association of Self-Employed (NASE) suggests that 58% of LLCs in the US operate as member-managed.
- I've discovered that whether to appoint a president or CEO in an LLC depends on the specific needs and scale of the business, with flexibility being a key advantage of the LLC structure.
Does an LLC Need a CEO or President?
An LLC does not need a CEO or President, but the company can opt to appoint one. Owners prefer to hire a manager or appoint a member to oversee the business.
Generally, a company CEO/President oversees all operations, makes strategic decisions, implements plans, and keeps the company on its business course.
For smaller companies like a limited liability corporation, the CEO will likely be more involved in daily operations, including finance, marketing, and decision-making.
A 2024 study by Stanford University's Center for Entrepreneurial Studies found that 72% of potential investors surveyed reported feeling more confident in an LLC when its leadership team included titles like president or CEO.
The specific duties of an LLC CEO/President are defined in the organization's Operating Agreement.
Crafting the Operating Agreement for an LLC is a pivotal moment that I always emphasize to my clients. This document is the backbone of your business, detailing the management structure and binding all members to its terms.
Many states do not require an LLC to formulate an operating agreement, but it is advisable to have one.
State-Specific Requirements
While the federal government does not impose specific management structure requirements on LLCs, state laws have their own stipulations regarding whether an LLC must have designated roles such as a president or CEO. For instance:
- California: LLCs are not required to have a president or CEO but must have at least one person responsible for the LLC's activities.
- New York: Does not specifically require LLCs to have presidents or CEOs but does require that the LLC's management structure be outlined in its operating agreement.
- Texas: Offers flexibility in management structures, allowing LLCs to designate officers and directors similar to a corporation or operate without them, depending on the company's operating agreement.
What Is a Manager-Managed LLC?
A manager-managed LLC is one in which the members hire managers to oversee day-to-day operations. A limited liability company can be a manager-managed or member-managed LLC.
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.
In my experience, clients who opted for this route found it liberating. It allowed them to focus on strategic growth while trusting a professional manager to keep the day-to-day operations running smoothly.
When it comes to a single-member LLC with only one member, its single member can automatically be the manager of the LLC.
"The decision to have a president or CEO depends on your LLC's size and complexity. For smaller LLCs, a member-managed structure might be sufficient. As your LLC grows, designating a president or CEO to lead daily operations can become more practical."
- Delina Yasmeh, J.D./Tax LL.M, Distinguished Expert in Mergers & Acquisitions
Who Can Be the LLC Managers?
LLC managers can be a members of the entity or a hired individual or managing company.
Most LLC managers are appointed members of the company, but they have the option to employ the expertise of a professional outside the company.
Members can hire a small group of managing professionals to conduct business operations.
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?
You can choose an LLC manager by consulting the operating agreement. The person listed as the president or CEO in that document will serve as the manager of the LLC.
The LLC members should agree on who will serve as the manager and their responsibilities.
From my experience, the absence of an operating agreement often leads an LLC to default to a member-managed structure, where power is equally distributed.
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.
From my experience, the right manager not only keeps the business compliant but also steers it towards its long-term goals.
Note, 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 its legal responsibilities before signing any contracts.
What Is the Title of the Officers of an LLC?
The titles of the officers of an LLC can be president, vice president, secretary, and treasurer [1].
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.
It's important to note that these are not management positions. The officers 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.
A managing member can also be called a managing director or chief operating officer (COO).
Do LLCs Have Directors?
LLCs are not required to have directors, but it is advisable to form a board.
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.
FAQs
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.
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. 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.
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 the manager. However, the term "manager" usually refers to someone employed by the LLC to manage its operations.
References:
- https://eminutes.com/corporate-and-llc-terms
