Choosing to start an LLC means you have a critical decision to make: deciding the management structure.
Member-managed LLCs give owners collective control over company decisions. On the other hand, manager-managed LLCs hand over the management authority of a professional manager or one or more elected members.
This guide will outline the basics of members vs. managers in an LLC and discuss a few tools and tricks to forming an LLC without errors.
Understanding the LLC Business Structure
Before diving into the members vs. managers debate, you should understand the concept of an LLC.
An LLC is a type of business structure that’s easy to create and involves less paperwork when compared to a corporation. It also offers personal liability protection to owners, meaning they cannot be held accountable for the company’s debts and obligations.
This business entity can have one owner (a single-member LLC) or multiple owners. When you’re the sole owner, you don’t need to decide between member management and manager management since you’ll be in charge of all management decisions by default.
When an LLC has more investors or multiple owners, things get complicated.
In this case, either all the members can collectively manage the LLC or elect a non-member or outsider as a manager. Alternatively, the owners can decide to use a combination of members and non-members to run the business.
The one in charge of management and make the following types…