What Is an LLC Manager? (Obligations & Benefits Explained)
Managers are in charge of what's happening with marketing, operations, logistics, or finances, to name a few.
As part of a team of professionals and marketing experts with over 10 years of experience, I will provide you with a detailed explanation of an LLC manager's responsibilities and tips on choosing the right type of management structure.
Quick Summary
- An LLC manager is an individual or entity responsible for running the business.
- A manager's fundamental duties include making business decisions, overseeing day-to-day operations, and handling financial as well as legal concerns.
- Statistically, the Small Business Administration Office of Advocacy notes that out of 33.3 million small businesses, 27.1 million are directly managed by their owners.
- Throughout the years I've worked in the LLC sector, I've learned that the ideal management structure for an LLC will depend on the company's line of industry, nature of operations, and business goals.
What is an LLC Manager?
An LLC manager is an individual responsible for managing day-to-day operations, making business decisions, and overseeing finances and transactions.
A member may be appointed to manage the company or the owners can employ the expertise of a professional.
For our company, the manager's duties and authority were specified in the Articles of Organization and the operating agreement.
An LLC manager has certain tasks, such as:
- Reviewing financial records
- Ensuring compliance with state and federal regulations concerning taxes and liabilities
- Organizing meetings
- Preparing meeting minutes
- Resolving internal disputes among LLC members
- Business operation - hiring and firing of employees and entering contracts
An LLC operating agreement is a document where LLC owners can outline the exact manager's duties.
Who Can Be an LLC Manager?
Drawing from my practical experience, an LLC manager may either be an appointed or elected member, an individual or entity with no membership interest, or an employed agent.
An LLC manager can do the following:
1. Appointed or Elected Member
The managing member (member-manager) is an individual who is the manager but can also be a member of the LLC, depending on state laws and operating agreement terms.
For our LLC, the manager was an elected member responsible for business decisions, including financial investment or withdrawal from the company.
2. Employed Agent
An agent manager is a nonmember employee or officer of an LLC employed by the owners for their expertise and experience.
3. De Facto Manager
The de facto (de jure) manager is a management position that exists on paper, only creating duties without any actual rights to manage company affairs, including voting, making major decisions, and taking actions as if they have power over the LLC's management structure.
A Member-Managed or Manager-Managed LLC - Which Is Better?
The optimal management structure for an LLC hinges on whether its owners wish to maintain full control or delegate management responsibilities.
Notably, according to the Small Business Administration Office of Advocacy, within the United States, of the total 33.3 million small businesses, 27.1 million are under the direct management of their owners, reflecting a significant preference for hands-on operation [1].
1. Member-Managed LLC
In a member-managed LLC, the owners can appoint one or more LLC members to manage the business.
This can be by unanimous agreement or a majority vote, depending on what is indicated in the LLC's operating agreement [2].
2. Manager-Managed LLC
A manager-managed LLC is one where another person will be appointed as a manager who has legal authority over your business.
"Opting for a manager-managed LLC could be beneficial if certain members, like family or investors, prefer not to engage in daily decision-making; this structure allows these members to relinquish control over routine business choices aimed at fulfilling the company's objectives."
-Jon Morgan, Co-Founder & Chief Editor of Venture Smarter
Members of a manager-managed LLC will not have full authority and control over the business.
Importantly, according to the 2020 County Business Patterns, 4.4 million out of the total 8.0 million establishments in the U.S. employed between one and four employees, highlighting that a large number of businesses operate with minimal staff, potentially making a manager-managed structure more suitable for streamlined operations and efficient management [3].
In most states within America, this type of limited liability company must appoint at least two managers to operate legally, although this isn't the case everywhere across the country, so check with your state laws before making any decisions on which structure you would like to use for your LLC formation.
Do LLC Managers Have Fiduciary Duties?
Yes, LLC managers have fiduciary duties to the LLC.
A fiduciary duty is a legal obligation imposed on an individual who agrees to act for and on behalf of another person in all matters connected with such agency—whether dealing directly with the property involved or otherwise.
A breach of fiduciary duties occurs when a person in a position of high trust exploits that relationship for personal benefit at the expense of his principal (or employer).
Related Articles:
- What Is a Governor of an LLC
- Does an LLC Have to Have a President or CEO
- LLC Manager vs. Registered Agent
FAQs
Can a Manager Be an LLC Owner?
A manager can be an LLC owner. This is usually the case with small businesses and single-member LLCs.
How Do LLC Managers Get Paid?
LLC managers are compensated as regular employees. When a company designates a member to be a manager, that person is entitled to receive reasonable compensation in addition to income and capital contributions.
Is a Manager of an LLC an Officer?
A manager of an LLC does not necessarily have to be an officer. LLC members and managers can appoint officers who are actively involved in business operations, but they don't need to have any other role in the company.
What Is the Difference between a Manager and an Authorized Member of an LLC?
A manager is a person or an entity that has the power to act according to the company's operating agreement and performs this active role. An authorized member is one of the LLC members who has some power by authorization to execute certain business operations.
References:
- https://advocacy.sba.gov/
- https://www.sec.gov/Archives/edgar/data/1345691/000119312512119426/d230618dex1012.htm
- https://www.census.gov/programs-surveys/cbp.html
