The limited liability company (LLC) is a form of business ownership that combines features of both limited partnerships and corporations.
LLC owner titles include "members." In this setup, there can be more than one member.
A sole proprietorship LLC is owned by only one person, while an LLC with multiple members would be co-owned by two or more individuals.
Co-ownership means that the members are equally liable for the company's debts, including any member's personal tax return.
Who Are Members of an LLC, and Who Manages the LLC?
Its members own the LLC. 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.
What Is the Owner of an LLC Called - Main Titles
Members should be the ones to manage the LLC, but if the operating agreement specifies that the members want someone to manage the LLC for them, a manager would be appointed.
The chief executive officer, chief operating officer, and chief financial officer are not generally members of an LLC.
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 have a duty to manage the LLC.
Other LLC Titles to Consider
LLC owners could use “LLC Member,” “Member Manager,” and “Owner” as correct titles. However, these often do not communicate what they do. The following titles will give everyone an idea of what owners do.
- Managing Director. This title means the owner oversees the LLC’s daily operations. They are mostly the highest-ranking position in the executive department. Often, these people directly report to the CEO.
- 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.
- Creative Director. These managerial titles are for the company’s creative aspects. It includes branding, design, and advertising.
- Technical Director. Technical directors manage the business’s technical processes. These people will usually report to the CTO.
If your LLC decides to use these titles, ensure every 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
Consider avoiding the following owner titles since they are broad, unclear, or inappropriate.
- Vague Titles. “Manager” or “Director” is too broad. These titles might not fully convey your duties to the LLC. This ambiguity could discourage other companies 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.
Also, humorous titles should stay within the company as inside jokes. It might send the wrong message to future business partners. They might not take you seriously, causing your LLC to lose more in the long run.
Does the Owner of an LLC Refer to Member-Managed LLC and 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 member manager, managing member, or managing partners. They will have the say in business operations.
This type of LLC can have one or more member managers.
Members appoint managers through a company's operating agreement, or the member manager themselves may create the company using members as managers with consent.
Since most business 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 members, the business owner/s, generally active in making policy decisions. Each member may act on behalf of the company in this management structure. They are usually entitled to bind the LLC.
This form of ownership has fewer formalities in setting up the company when compared to a corporation.
These types of LLCs are also known as member-owned LLCs and member-operated LLCs.
When Does Selecting Managers Make Sense?
A structure managed by members is more common for single and multi-member LLCs. However, some scenarios make hiring a manager make sense to maintain smooth business operations.
- 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 manager.
- Growth. Even LLCs with this structure could grow too big. 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.
How Many Members Can Be In an LLC?
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.
An LLC may have an unlimited number of members who can be individuals, other LLCs, or corporations.
What if There Are No Members?
A one-person LLC it's usually referred to as a single member LLC rather than a sole proprietorship, and the single LLC member holding ownership interest is generally referred to as a member-manager instead of sole proprietor.
What Is the Liability Protection of Members in an LLC?
LLC owners are not personally responsible for debts or liabilities incurred by the LLC, unlike a single member LLC.
Each state's laws provide that, unless agreed otherwise by the interested parties, all business decisions are made by majority vote or unanimous consent, which requires that all members approve any liability of the LLC.