Managing Member vs. Owner
Difference between Managing Member and Owner
A managing member is an owner of a limited liability company (LLC). Managing members are involved in the LLC’s daily management and represent the LLC in contracts and negotiations.
Responsibilities of Managing Member
As a managing member, responsibilities include directly operating the business and agreeing to contracts. Downsides include paying self-employment tax on distributed revenue.
LLC Management Structures
- In a member-managed LLC, the owners collectively control the company. Managing members handle day-to-day activities in a member-managed LLC. In a single member LLC, the sole member often serves as managing member.
- In a manager-managed LLC, management authority lies with appointed managers. Managers often come from outside the business and aren’t owners, avoiding multiple member input affecting company operations.
- The default structure for an LLC is member-management, common in small businesses. Manager-management is suitable for LLCs with passive investors.
Multiple Managing Members
An LLC can have multiple managing members. All members serve this role in a member-managed structure.
Comparison of Member and Manager-Managed LLCs
The key difference between member and manager-managed LLCs is that the latter allows for passive investors. Members have a more hands-on role in member-managed LLCs.