Can I Change an LLC From Members to Managers?

By Heather Frances J.D.

A limited liability company is an independent legal entity formed under your state’s laws. If you choose to organize your business as an LLC, you must also decide whether your LLC should be managed by its members or by non-member managers. While it can be a hassle to alter this decision later, you can change your management structure after you start your business.

Members Vs. Managers

All LLCs have at least one member, or owner, but your LLC can have an unlimited number of members. Each owner’s interest is represented by a percentage of ownership or by a number of units, which are similar to shares in corporations. Members often manage the company themselves, especially in a small LLC. Non-member managers have no ownership rights in the LLC. They are appointed by the LLC’s members and are employees of the LLC.

Management Structure

If you have only a few members and all members intend to be heavily involved in your LLC’s operations, a member-managed structure may be a good option for you. However, if your LLC has dozens of members, it may be impractical for the members to make day-to-day management decisions together. Similarly, if your LLC has owners who prefer to provide operating capital for the LLC without being involved in the business’ day-to-day operations, they may not want to manage the LLC. Thus, your members can choose outside managers.

Ready to start your LLC? Start an LLC Online Now

Articles of Organization

Your LLC is formed when you file articles of organization with your state’s registration office, often the secretary of state, along with a filing fee. The articles list the basic information about your business, including your business name, address and statement of purpose. Your LLC typically must elect to be member-managed or manager-managed at the time you file your articles of organization. There may even be a place to record this election on your state’s articles of organization form.

Changing Course

LLC members can vote to appoint managers to run the LLC at any time. Whether you initially select a member-managed or manager-managed structure, you can change your election later by amending your articles of organization. Typically, changes to an LLC’s articles require the LLC’s members to vote approving that change, and your state’s laws may require unanimous consent from all members. You can also include provisions related to the management process in your LLC’s operating agreement, an optional document that provides further details of your LLC’s operations.

Ready to start your LLC? Start an LLC Online Now
Management Structures in a Limited Liability Company

References

Related articles

Can a Business Own Part of an LLC?

Members of a limited liability company (LLC) can be individuals or business entities, including corporations, trusts or even other LLCs. Your existing business may want to form a new LLC as an investment or to spread out and protect your business’ assets or liabilities. Your business entity may either be the single member of the new LLC or may share ownership with other businesses or individuals. Most states have very few restrictions on LLC ownership.

Can a Member of an LLC Be Fired?

Managing relationships between owners of a small business can be quite trying at times. In cases of severe disagreement or incompatibility within a limited liability company, firing one or more owners, referred to as members, may be an option. However, generally an LLC may only fire a member when the operating agreement allows it, and if the owner is compensated for his share of the business.

Incorporating Vs. LLC

One of the most important initial decisions in starting a business involves deciding what type of business entity your new venture should be. Two options are corporations and limited liability companies, or LLCs. There are distinct advantages and disadvantages to each type with respect to personal control, taxation and personal liability.

LLCs, Corporations, Patents, Attorney Help

Related articles

Going From Multi Member LLC to Single Member LLC

You don’t have to keep the same members in your business, even if you start off as a limited liability company. Your ...

Can I Have a Partner With an LLC?

A Limited Liability Company is a common business entity that may be owned and managed by one or more individuals. LLCs, ...

How to Transfer Ownership of an LLC to a Corporation

Limited liability companies and corporations are both governed by state law. LLCs have members who own the company and ...

How to Omit a Member of an LLC

Since business relationships don’t always work out as planned, it may become necessary to terminate certain ...

Browse by category
Ready to Begin? GET STARTED