“Member Managed” means the LLC is simply managed by the Members. All Members have similar powers to run day-to-day operations of the business, and the Operating Agreement will specify what powers the Members have that do and do not require a vote.
“Manager Managed” means the day-to-day operations of the LLC is managed by a Manager. The Manager has certain powers, as specified in the Operating Agreement, that do not need the approval of the Members. Note that Members will always have some powers reserved to a vote, such as assigning a new Manager, or dissolving, or bringing on new Members. A Manager does not need to be a Member, but one or more Members can certainly be the Manager.
Typically, I advise clients that it’s often best to go with a “Member Managed” LLC unless one of two things is present:
- One or more Members will run day-to-day operations, and other Members will not (i.e. silent investors, for example). It’s often convenient to make as Managers the day-to-day operating Members, so they can run the business without having to always call a vote.
- One Member is really the “one in charge.” This Member can be assigned as the Manager, and have additional powers assigned to him or her.
This is often a very complicated subject that is often ignored. If you have questions, please contact us.