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What is the difference between a member-managed and a manager-managed LLC?

On Behalf of | Jul 10, 2024 | Business Consulting & Advice |

When forming a new company, choosing the right structure is a key decision. One popular choice is a Limited Liability Company (LLC). Nonetheless, there are also variations within the LLC structure. For example, it can be member-managed or manager-managed. 

A member-managed LLC is run by the owners, whereas a manager-managed LLC is run by managers that the owners recruit. There are advantages and drawbacks to both types of operations, and the optimal choice will largely depend on specific circumstances. Outlined below are some important factors to consider. 

Advantages of a member-managed LLC

A member-managed LLC can be useful for startup companies where the owners want to be actively involved in day-to-day operations. This type of structure is relatively streamlined and key decisions can be taken quickly, with few complications. 

Advantages of manager-managed LLCs

A manager-managed LLC can be highly beneficial for larger companies with multiple owners. When multiple owners are at play, some may want to be more passive while others want to take a hands-on approach. This can cause disputes if the company is not structured appropriately.

Appointed managers can divide the workload and handle day-to-day tasks according to their strengths. This means that important decisions can often be taken quickly, with little room for deadlock or disputes. Further advantages of manager-managed LLCs include: 

  • Bringing in the most talented people to run the company 
  • More attractive to investors 
  • Increased organization in larger companies 

Choosing the appropriate structure for your business is one of the most important decisions you will make as a business owner. This is not a decision you should take without first seeking legal guidance. Call us today to discuss your options in more detail.