Does an LLC Entity Have to Have One Manager?

By Tom Speranza, J.D.

Does an LLC Entity Have to Have One Manager?

By Tom Speranza, J.D.

A limited liability company (LLC), like any other business entity, requires someone to manage its operations and affairs. However, the LLC laws of most states do not require an LLC to formally designate individuals as managers. An LLC without managers is managed directly by its owners, known as members under the LLC laws.

Businesspeople around conference table

Manager-Managed vs. Member-Managed

An LLC is manager-managed if individuals are formally designated as managers to oversee the LLC's operations and make the day-to-day decisions required to run the company. That title is a legally recognized role under state LLC laws, and managers have rights, duties, obligations, and liabilities that are spelled out in those laws. Managers can be members of the LLC, but if the title is given to anyone—member or otherwise—the state considers the LLC as manager-managed

An LLC is member-managed if no one is given the manager title. An LLC without managers is managed directly by its members.

State Law Variations

State LLC laws vary according to which version of LLC management is the default structure. Some states require an LLC to state in its articles of organization whether it is member-managed or manager-managed. Others require the articles to name the initial managers or to include a statement that the LLC is member-managed.

Delaware, the most popular state for forming LLCs, requires nothing in the certificate of formation about management. Delaware law provides instead that the LLC's operating agreement, which is not a public document, deal with management issues.

Different Ways to Structure LLC Management

An LLC operating agreement, a contract signed by an LLC's members, sets out the rules and procedures for their ownership of the company. An operating agreement is similar to a corporation's bylaws or shareholders' agreement.

Most operating agreements have specific provisions about who manages the company, how managers are chosen or removed, how they make decisions, and the scope of their authority. Some common LLC management structures include:

Member Management

If an LLC is closely held (i.e., just a few members), the members can decide to manage the company themselves. If they can't informally agree on a given issue, they can hold a vote—either with each member having one vote or their votes weighted by the percentage of the company they own.

Single Manager

Appointing one manager with broad authority can simplify matters for an LLC. An operating agreement typically includes a list of major decisions that the manager cannot make without first obtaining approval of the members. These decisions often include signing major contracts, selling assets, borrowing money, commencing litigation, and hiring or firing certain employees.

Board of Managers

Electing a board of managers is a way for an LLC to reproduce the board of directors structure of a corporation. As with a single manager, the board may be subject to a list of major decisions requiring prior member approval or unanimous consent of the managers. And, like a corporation, an LLC board can have managers designated by specific members or by different classes of membership interests.

Deciding how to structure the management of an LLC is a crucial first step for an LLC's members when they form the company. An experienced corporate lawyer can help in deciding whether an LLC needs managers and, if so, how to tailor the scope of their authority to fit the particular situation.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.