A limited liability company, or LLC, is a business entity often managed by various officers. Each officer typically has a different title and set of responsibilities. While the members of an LLC are free to develop any titles they choose, certain statutory designations apply to any person holding a specific position within the organization. The guidelines for forming and managing an LLC vary from state to state, so the particular titles for each designation may differ, although most states follow a similar structure.
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A member of an LLC is any person who owns or holds a vested interest in the LLC itself. Owners, managers, investors and lenders may all be members. Members can hold various titles, including president, vice president, treasurer and secretary, but these titles can be superficial. An individual member derives his authority from the LLC’s operating agreement, which defines each member’s duties, powers and obligations. Corporate officers -- including managers -- may be members of the LLC, but a corporate title does not automatically convey membership. Likewise, employees are not necessarily members; while members may offer stock or membership in the LLC as a benefit to employment, most employees of larger LLCs are not actual members.
Managers are appointed persons who supervise the internal practices of an LLC. An LLC administered by managers is referred to as “manager-managed,” in contrast to an LLC run by its own members, referred to as “member-managed.” Managers are rarely members of the LLC; instead, the members typically appoint experienced persons outside of the LLC to assume management responsibilities. Managers often comprise an executive board overseeing the LLC, call votes to make major decisions for the company and handle the company’s legal and financial matters.
A shareholder is a person or entity who owns a portion of the LLC. Shareholders are almost always investors -- to fund the LLC’s start-up or expansion, the company may offer options to purchase a percentage of the company to shareholders in exchange for revenue. Shareholders are often members and may also serve as managers or hold other corporate titles.
A sole proprietor is an individual who autonomously owns, maintains and operates her own business. Many states permit sole proprietors to organize as an LLC to sever their personal and professional interests; while the sole proprietor of a proprietorship may be personally liable for any claims brought against her business, the proprietor of an LLC is not. A sole proprietor is the only member of an LLC and assumes the roles of all other LLC officers in practice.
A registered agent is the designated person (or, in states that permit it, entity) who acts on behalf of an LLC as the recipient of legal service within the state of operation. While a registered agent need not be a member of an LLC, he does need to reside full time in the state in which he acts as registered agent for the LLC. The agent’s primary function is to act as a liaison between the state of operation and the LLC itself -- should a claimant file a claim against the LLC, the agent is responsible for accepting service of notice and notifying the LLC. Many registered agents also receive tax notices, renewal forms and other notifications from the state and alert the LLC of any changes to state guidelines affecting the LLC’s operation.
References & Resources
- "Limited Liability Companies: Formation, Operation & Conversion"; Robert W. Wood et al.; 2006
- "Working With LLCs and FLPs"; Thomas F. Commito; 2000
- "Business Law & the Legal Environment"; D. P. Twomey; 2007