How to Manage an LLC? (Everything You Need to Know)
Managing a limited liability company (LLC) primarily involves overseeing day-to-day business operations, making business decisions, handling finances and transactions, and dealing with legal issues.
With over a decade of practice as a business consultant for Limited Liability Companies in various states, I conducted comprehensive research to provide you with the ways you could manage an LLC.
I collaborated with lawyers and legal advisors from the Venture Smarter team, to provide you with legal analysis and all the information you need.
Quick Summary
- To manage an LLC, the right manager should be hired or appointed for the success of the company.
- There are ceartain factors to consider including the operating agreement, organizational structure, and legal aspects of the state.
- An LLC can be manager-managed or member-managed.
How To Manage an LLC
To manage an LLC, several procedures and processes need to be completed by the person in charge. The manager should oversee that the following are accomplished:
1. Following the Operating Agreement
An LLC operating agreement is a crucial document for both single-member and multi-member LLCs. As an LLC manager, it is essential to understand your responsibilities and effectively oversee the company.
The operating agreement serves as a key tool to manage an LLC and ensure liability protection.
The operating agreement outlines various aspects, including:
- Roles and responsibilities of the manager.
- Operational guidelines for the manager.
- The management structure of the business.
- Procedures for member meetings and voting rights.
- Stipulations regarding members' rights within the LLC structure.
By creating and adhering to an operating agreement, you establish clear guidelines for managing your LLC and safeguarding its interests.
2. Obtaining an EIN
You can obtain an Employer Identification Number (EIN) once you have registered with the Internal Revenue Service (IRS) [1]. The EIN is required to open an LLC business bank account and hire employees.
3. Dividing Personal and Business Assets
The manager should ensure that the business and personal assets of each member are separate. This would protect the personal property of LLC owners from creditors or lawsuits.
4. Handling Paperwork
The manager can delegate handling the LLC paperwork for the company but has to make sure all legal documents are in order.
These include annual filing, LLC annual reports, amendments, and other paperwork made in the name of the limited liability company.
5. Allocation System for LLC
The terms of the allocation system are contained in the LLC operating agreement.
The manager has to oversee that the share of profits is distributed proportionately among the LLC members based on the percentage of ownership.
6. Filing Annual Reports and Taxes
The manager ensures all tax payments and annual reports are filed to the IRS by an appointed representative.
7. Other Important Considerations
The manager should verify that a contract is legal or valid before collaborating with other business entities.
The manager also must make sure the LLC complies with all state operating requirements.
The manager must recommend that the company be covered by corporate insurance to protect its assets from any legal matters that may arise.
What Is a Manager-Managed LLC?
A manager-managed LLC is a company where members appoint a professional manager to handle the daily operations of the business.
In contrast, member-managed LLCs are businesses in which all members share the responsibility of running the company.
Opting for a manager-managed LLC allows members to delegate operational tasks, providing them with more time and flexibility.
Conversely, member-managed LLCs grant all members direct control over the company but require increased commitment and effort to ensure smooth operations.
If you are still unsure about which type of management structure is right for your business, it's best to consult an attorney from a reputable law firm who can help you weigh out the pros and cons of both options.
Who Are Members of an LLC & Who Manages the LLC
The members of an LLC are the company owners who contribute money, property, or services to the company.
They can be individuals, partnerships, or S corporation businesses. A member of an LLC has the rights and responsibility to the company.
This includes having voting power in decision-making, receiving financial benefits from LLC operating agreement provisions, sharing responsibility for debts, or assuming the risk of another company party incurring one.
A manager is a person, usually appointed by the LLC owners, who is responsible for running the business's day-to-day operations, such as submitting legal documents.
They do not have to be a member of the company, but they need to know about operating an LLC. In some cases, members may also act as managers.
Who Are the LLC Managers?
LLC managers are knowledgeable professionals with diverse backgrounds and expertise in LLC operations. Managers must provide comprehensive guidance on LLC management to all members.
The most efficient approach to managing an LLC is by fostering a collaborative environment where both managers and members function as a unified team.
By working together towards shared objectives, all parties involved in the company can reap the benefits of this collective effort.
Related Articles:
FAQs
Can I Manage My LLC?
You can manage your LLC, but it will require more time and effort on your part. You must also have some knowledge about how to operate an LLC.
Does an LLC Have to Have a Manager?
An LLC does not have to have a manager. However, it is usually best for members with more knowledge about operating an LLC to manage the business instead of everyone taking on equal responsibility.
How Many Members Should an LLC Have?
There is no specific number of members an LLC must have to be formed. However, most states require that an LLC have at least two members.
Managing an LLC
Choosing the right manager is essential for the success of an LLC. Whether the entity is member-managed or manager-managed, the LLC is greatly influenced by the person in charge.
The manager is responsible for both the internal and external affairs of the company and must ensure all aspects of the business are in order.
References:
- https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
