In this week's Freedom Friday blog and e-mail newsletter, I want to talk about a topic that relates to LLCs, and this came up in a recent consultation with a prospective client. I want to talk about how to choose a manager for your LLC. Now, you might be asking, why do I need to choose a manager for my LLC? Legally, all LLCs are managed by somebody, or a group of somebodies (you can have more than one manager and operate like a board of directors). But, an important consideration in creating the operating agreement for your LLC is choosing a manager for your LLC. There are four (4) basic options in choosing a manager for your LLC:
1. You Can Be Your Own LLC Manager
The first option in choosing a manager for your LLC is that you can be your own LLC manager. Before I explain what this means, it is important that this option is for what is called a single-member LLC. A single-member LLC is an LLC which is “owned” by only one person. The “owners” of an LLC are called “members,” just like the “owners” of a corporation called “shareholders.” You can have just one “member” or “owner” of an LLC, and it is called a “single-member LLC.” If you have more than one “member” or “owner” of the LLC, then you have what is called a “multi-member LLC.” More on that in a moment. But back to a single-member LLC, you can be your own LLC manager. The manager of an LLC makes all the business decisions for the LLC business. This is usually more important in an LLC with more than one member (where some LLC members desire to be more of a passive investor in the LLC), but when its just you, and you are the LLC for a small business, then you can be your own manager, and have the managerial responsibilities to contract for the LLC, to bind the LLC, and make those types of decisions. Not only is this very common, but this is also the default option for a single-member LLC when the operating agreement does not provide otherwise.
2. One of the LLC Members Can Be the LLC Manager
The other three options I'm going to talk about really apply to a multi-member LLC, when the LLC is owned by more than one person. The first of these options is for one of the LLC members can be the LLC manager. Let's look at this situation for the purposes of illustrating the concept. If you're wanting to form an LLC with several members, many of these members may not wish to participate in the critical business decisions of the LLC. There is usually one member who is driving the formation of the LLC, and the remaining LLC members are usually just wanting to participate as passive investors. In this situation, the members of the LLC can elect one of their members to be the manager of the LLC, and this choice should be designated in the operating agreement for the LLC.
3. All of the LLC Members Can Be Managers
Another option if you have more than one member, or owner, of the LLC, is that ALL the members of the LLC can be the managers of the LLC together. This option works best when you have a smaller number of LLC members (like 2 or 3). For instance, if a husband and wife wish to come together to form an LLC, then it does not make sense for either one of them to be the manager of the LLC. They should both be managers and make all the business decisions together. Similarly, if three (3) individuals come together to form the LLC as “business partners,” then they all might wish to be managers for the LLC business and make their decisions together. In either case, the manager(s) should be designated in the operating agreement for the LLC.
4. Someone Else Can Be Your LLC Manager
The final option for choosing your LLC manager, and again, this applies more to a multi-member LLC as compared with a single-member LLC, is that someone else can be your LLC manager. If you are forming an LLC with a significant amount of members, or owners, and no one wants to take responsibility for the business decisions of the LLC on a daily basis, then its time to hire a professional LLC manager, and designate him or her as the LLC manager in the operating agreement for the LLC. This option is not done very often, but the members of an LLC can always hire a third party outside the LLC business organization to manage the daily affairs of the LLC business. Again, this is not very common, but so long as you put this choice in your operating agreement, it's a possibility for a multi-member LLC.
If you are interested in starting a small business anywhere in Oklahoma, or you already have a small business and you are looking to grow, please contact me at [email protected] to schedule a FREE strategy session.
For more information regarding Liberty Legal Solutions, LLC, please visit our website at http://www.libertylegalok.com