What Is the Owner of an LLC Called? (Official Titles Guide)
The official title of limited liability company owners can be altered to reflect the specific role that characterizes the position.
Drawing upon extensive experience and years of research in this field, our legal research panel has explored the possibilities of modifying the official title of limited liability company owners to suit their distinct roles.
In this article, we aim to provide you with a thorough understanding of the various titles that can be ascribed to an LLC owner. Our insights are underpinned by comprehensive research and personal expertise, guaranteeing the highest level of accuracy and credibility in our explanations.
Quick Summary
- The owner of an LLC is commonly referred to as a "member," with titles such as CEO, principal, managing member, or president to clarify their role within the company.
- LLCs can be either member-managed or manager-managed, impacting the structure and operational dynamics of the business.
- According to data from the Small Business Administration, over 35% of small businesses in the United States operate as LLCs, which shows the popularity of this structure for its flexibility and liability protection.
- My experience has shown that the choice between member-managed and manager-managed LLCs offers valuable flexibility, allowing business owners to tailor management structures to their specific needs.
What Is the Owner of an LLC Called?
The owner of an LLC may be called a CEO, principal, managing member, or president to name a few. The title should reflect the LLC owners' main role in the entity.
The chief executive officer, chief operating officer, and chief financial officer are not generally LLC members.
Those positions usually belong to managers or other non-member professionals.
Other officer titles can include vice president, secretary, treasurer, and assistant treasurer.
Like directors of a corporation, LLC officers must manage the LLC.
"When selecting a title for yourself, remember two key guidelines: Firstly, your title should signal to external parties that you possess the authority to execute contracts on behalf of the LLC. Secondly, the titles you choose for business ownership should always be clear and not deceptive."
- Delina Yasmeh, J.D./Tax LL.M, Distinguished Expert in Mergers & Acquisitions
Who Are Members of an LLC, and Who Manages the LLC?
The owners are the members of an LLC, and the business entity may be managed by appointed members or hired managers.
LLCs are either member-managed or manager-managed, depending on how the operating agreement specifies that LLC managers are appointed.
A member can't be an LLC manager unless the LLC's operating agreement specifically provides for it.
An LLC with multiple members can also have a different LLC owner title, offering different rights and possibly different voting powers.
LLC membership interests are freely transferable, unlike LLC membership interests in a corporation [1].
According to a 2004 LLC Membership Interest Transfer Agreement between Sylvan Learning Systems, Inc., and Identix Incorporated, 100% of the seller’s total interest in Sylvan/Identix Fingerprinting Centers LLC was transferred, highlighting the significant impact such transactions can have on company ownership structures.
Other LLC Titles to Consider
Apart from the owner of the business, there are other LLC titles to consider to clearly define the roles of certain positions. It would reflect the organizational structure of the company that directly impacts investors.
1. Managing Director
Drawing from our experience, the managing director oversees the LLC’s daily operations and is in charge of decisions regarding finances, compliance, work organization, and reporting.
They are mostly the highest-ranking positions in the executive department. Often, these people directly report to the CEO.
2. LLC President
Having someone in the role of LLC President alongside or instead of a Managing Director brought a new level of efficiency and clarity to our operations.
In our journey, the President was indeed the CEO’s second-in-command, playing a critical role in decision-making and strategy. This dual role was particularly effective in our smaller setup, allowing for swift action and clear communication.
An LLC President could also do the same functions as a Managing Director. They act as the CEO’s second-in-command. A sole proprietor can take both “CEO” and “President” titles in smaller businesses.
3. Creative Director
These managerial titles are for the company’s creative aspects. It includes branding, design, and advertising.
4. Technical Director
Technical directors manage the business’s goals, project specifications, requirements, and progress reports.
If your LLC decides to use these titles, ensure every designated member other than the owner knows their role. Outline each official title in the company’s operating agreement to make it easier for everyone.
LLC Owner Titles to Avoid
The following LLC owner titles need to be avoided since they are broad, unclear, or inappropriate.
- Vague Titles. Our team discovered that titles such as “Manager” or “Director” are too broad. These titles might not fully convey your duties to the LLC. This ambiguity could discourage other companies and investors from dealing with you.
- Inaccurate Titles. LLCs are often considered partnerships or sole proprietorships. However, “Sole Proprietor” or “Partner” is incorrect since it could make people misunderstand your business type.
Does the Owner of an LLC Refer to Member-Managed LLC and Manager-Managed LLC?
The LLC owner does not refer to member-managed LLC and manager-managed LLC.
1. Manager-Managed LLC
An LLC managed by a manager means the members will not be involved in making business decisions for the LLC, such as member meetings and managing legal documents.
The manager would make those decisions and is often referred to as manager-managed. They will have a say in business operations.
This type of LLC can have one or more managers.
2. Member-Managed LLC
A member-managed LLC appoints one or several members to oversee the company's day-to-day operations in terms of finances, investments, decision-making, and work organization.
Since most LLC owners want to limit their liability, an LLC member-manager is more common than a corporation serving as a director.
On the other hand, self-managed limited liability companies (LLCs) have their LLC members, the business owner/s, generally active in making policy decisions.
Each member manager may act on behalf of the company in this management structure. They are usually entitled to bind the LLC.
Related Articles:
- Who Can Be a Member of an LLC
- Does an LLC Have a President or CEO
- How Do You Find Out Who Owns an LLC
- How Can You Change the Ownership Percentage of an LLC
When Does Selecting Managers Make Sense?
Selecting managers makes sense when the company needs to designate an individual or entity to oversee business operations.
A structure managed by members is more common for single and multi-member LLCs. However, hiring an independent manager makes sense to obtain the expertise beneficial to the business.
Hiring an experienced independent manager features the following advantages:
- Attract and encourage passive investors: Consider designating managers if you have many individuals supporting your business but opt out as active participants. It allows these investors to keep staying in the background.
- Large Memberships: The lack of limitation on the number of LLC members is financially beneficial. However, it makes management more challenging. If your decision-making is too complicated or divisive, get a non-member manager.
- Growth: Even LLCs with this structure have the potential to grow. When it happens, it's better to hire a manager to manage daily operations. After all, you can change your company status at any point.
- Multiple Locations: If your LLC has various areas, hiring LLC managers is the best course of action. Having one per location makes it easier to hire and manage other employees. They can handle each area's daily operations, allowing you to focus on the bigger picture.
Different Classes of LLC Membership
At its core, creating different classes of membership allows you to tailor the rights, responsibilities, and benefits among the members of your LLC. This flexibility is a big plus, especially if you're looking to attract investors or want to reward certain members without changing the overall management structure.
Here's the lowdown: You can have "Class A" members who might have more voting power or a larger share of the profits and "Class B" members who have less.
This setup is super useful for startups or growing businesses that want to bring in new investors without upsetting the balance of power. It allows you to offer something attractive to new members while keeping control in the hands of the original owners.
Plus, it can make profit-sharing more flexible. You're not stuck with a one-size-fits-all approach; you can customize how profits are distributed among different classes.
FAQs
How Many Members Can an LLC Have?
An LLC may have an unlimited number of members who can be individuals, other LLCs, or corporations.
An LLC has certain advantages over corporations, such as the flexibility to determine the LLC members' percentage of ownership and continuity of life after one member withdraws.
What if There Are No Members?
If there are no members, a one-person is usually referred to as a single-member LLC, and the single LLC member holding ownership interest is generally referred to as a member manager instead of a sole proprietor.
LLC Owners' Titles
The LLC owner is generally referred to as a member. However, the title may be revised to define the role of the position more clearly.
You can avail of specific designations using top online legal services to properly designate and define the roles and responsibilities of the LLC owners.
References:
- https://www.sec.gov/Archives/edgar/data/735780/000095013404007752/c85469exv10w58.htm
Does anyone here use different titles for different situations? Like CEO on marketing materials but member on legal documents? Curious how others approach this.
Does anyone here use non-traditional titles like Creative director or Technical director for their LLC roles? I’m curious if that impacts how clients or partners perceive your authority.
Interesting…Has anyone found that using specific titles like CEO or Managing Member has impacted their business credibility?
Reading this article reminded me of the importance of clear titles not just internally, but for how others perceive your business. This is such valuable advice for anyone starting an LLC.