Registered Agent vs Manager (Exploring Key Differences)
As a novice LLC owner, you may be confused between the roles of your LLC manager and the registered agent.
To help you understand what sets these roles apart, we collaborated with our licensed business specialists, who have been in the LLC sector for over two decades.
We spent five weeks researching the different LLC management structures to understand the roles of a manager and registered agent in a company.
Here's everything you should know regarding the differences between an LLC manager and a registered agent.
Quick Summary
- The manager oversees daily operations and contract negotiations for an LLC, while a registered agent handles legal correspondence and state filings.
- A registered agent ensures compliance and privacy for the LLC, receiving legal notices and keeping the business in good standing.
- As the registered agent sector is projected to grow at a CAGR of 4.71% between 2023 and 2029, this highlights the increasing importance of legal and state compliance for LLCs, a responsibility separate from the internal management tasks handled by the LLC manager.
- From my perspective, the key differences between a registered agent and a manager include their roles, financial rights, guidance by operating agreements, and voting rights.
What Is a Registered Agent?
A registered agent is an individual or business that serves as your company's point of contact with the state where the LLC is registered.
A registered agent is liable for receiving, processing, and forwarding legal notices about taxes and compliance to business owners [1].
The benefits we got from using an authentic registered agent service for our company include the following:
- Regular compliance reminders: Companies that provide registered agent services keep you informed of any obligations necessary to maintain the high standing of your LLC while giving you regular compliance reminders.
- Availability: If you act as your own registered agent, you may miss important alerts due to unavailability. But with a professional registered agent service, you'll have someone available throughout regular business hours to receive and process legal documents and notices from the same state of incorporation.
- Privacy: The company’s agent publicizes their physical address in the public register, safeguarding your home or business address.
- Confidentiality: A commercial agent will swiftly and discretely inform you if your company is sued or subpoenaed.
What Is a Manager?
An LLC manager is an authorized person in charge of the day-to-day operations of a limited liability company.
Drawing from our experience, a manager-managed LLC is run like a corporation, with a centralized management company or a managing member who makes decisions and takes action on behalf of the LLC without necessarily getting the non-managing member's approval.
The LLC's managers are bound by fiduciary obligations that mandate them to act for and on behalf of the members in all circumstances [2].
Fiduciary duty also calls for complete honesty and undivided allegiance amongst individuals involved in a shared endeavor (like managing company shares and assets).
"Hiring an LLC manager is crucial when your company or ownership is extensive and diversified to allow for effective management sharing across all of the participants."
- Lou Viveros, Growth & Transition Advisor
Here are some of the perks of having a managing member:
- Better management: With over 1.92 million managers in the U.S. as per Zippia, employing a professional manager taps into extensive expertise, enhancing contract negotiations and operational success [3].
- Faster decision-making speed: With a manager overseeing the LLC business operations, making decisions for the entity is easier and faster because no input is required from the member of an LLC.
- Better investor attraction: Manager-managed LLCs attract more investment opportunities because investors do not want to participate in any member management responsibilities.
- Allows passive investment: You can easily invest in a manager-managed LLC without worrying about the daily operations or decision-making as the manager handles these.
However, hiring a manager has the following setbacks:
- It can be costly to outsource a professional manager from a third-party company.
- A manager's responsibility may be limited when there are certain operations of the company that require cooperation from all of the members.
- If an LLC is member-managed, all decisions may need a unanimous vote, depending on the operating agreement's provisions.
- Investors may be less interested in investing in member-managed LLCs since they don't want to be involved in business management.
Learn the difference between the member-managed LLC and manager-managed LLC.
Key Differences Between a Registered Agent and Manager
A registered agent and a manager are crucial for the success of an LLC. Here are the key differences between these two:
1. Differences in Roles
Regarding roles, a manager superintends the daily operations of the limited liability company, while an LLC registered agent is primarily a contact point with the Secretary of State.
Additionally, it's the manager's responsibility to make business decisions regarding the tactical and strategic decisions of the company, but a registered agent has no power regarding these decisions.
2. Financial Rights
Drawing from our experience, if an LLC is member-managed, the members have certain financial privileges that a registered agent doesn't.
LLC members are entitled to an equitable distribution of dividends, profits, and shares, whereas a registered agent receives only payment for their services.
3. Guided by Operating Agreements
The LLC operating agreement controls a manager's credentials and roles, while it has no power over the duties of a registered agent.
The operating agreement also specifies the type of management structure the LLC has selected and describes how the manager's administrative powers and obligations are distributed.
4. Right To Vote
An LLC manager and members have the right to hold meetings and vote for all matters affecting business operations and financial success.
This is a privilege that an LLC registered agent service doesn't have, as the agent is focused on external business aspects like document filing.
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FAQs
Do I Need Both a Registered Agent and a Manager for My LLC?
Yes, you need both a registered agent and a manager for your LLC. These two have different roles that are crucial for the company's success.
Can an Agent Also Be a Manager?
Yes, an agent can also be a manager. This is applicable if the LLC owner is the manager and designates themselves as the registered agent.
Should I Get an Agent or Manager First?
You should get an agent first because naming a registered agent is crucial during business formation. However, having a manager in mind is important because certain legal documents require you to provide their details.
References:
- https://www.sos.state.tx.us/corp/registeredagents.shtml
- https://www.law.cornell.edu/wex/fiduciary_duty
- https://www.zippia.com/manager-jobs/demographics/
