Can an LLC Elect a Non-Member as a Treasurer?

By Jeff Franco J.D./M.A./M.B.A.

A limited liability company, or LLC, has some characteristics of a partnership and a corporation. Like a corporation, owners aren’t liable for debts and other obligations of the business; like a partnership, an LLC allows for flexible management. Depending on how the articles of organization are written, and depending on the wishes of the LLC members, it's possible for non-members to fill a management position, such as a treasurer.

LLC Formation

Although laws vary among states, the process of forming an LLC is similar across different jurisdictions. Members must choose a legal name for the LLC and file the state-mandated formation document, which is commonly called the certificate or articles of organization. Formation documents tend to be short, and at a minimum, will require the LLC name, the name of the person filing the documents on behalf of the LLC, and the name of a registered agent within the state. They also usually require the address of the LLC’s main office. Some states, such as Texas and California, require members to decide whether the business will be member-managed or manager-managed at the time of formation, while others, like Delaware and New York, do not.

Operating Agreement Flexibility

States have laws that cover all aspects of LLCs created within their jurisdiction. However, these laws typically apply only if the LLCs agreement doesn't address an issue. Essentially, the LLC operating agreement -- as long as it doesn't break any state laws -- can specify policies and rules that all current and future LLC members must adhere to. For example, the operating agreement can stipulate which management positions, such as treasurer, can be held by non-members.

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Limitations on Treasurer Authority

If an LLC approves the hiring of non-member managers, these individuals become employees of the LLC. And although the members can agree to give an employee more authority, there are typically limitations on the types of decisions an employee can make. For example, if an LLC treasurer is responsible for managing the company’s finance department, he doesn't typically have authority to make significant decisions that are usually reserved for members, such as deciding to sell off a division of the business, acquire or dispose of expensive equipment and property, or approve mergers. Moreover, LLC non-member managers do not have any authority to amend an operating agreement.

Changing Management Structure

Despite what the operating agreement states, it is possible to make changes to it, either by following the provisions in the operating agreement itself or by following state law. For example, suppose members are unhappy with the achievements of their treasury department and decide to run it themselves. The operating agreement will typically outline a procedure whereby members can change the operating agreement, specifying for example the number of members who must agree to amend it.

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References

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