Limited liability companies provide liability protection similar to partnerships. They can have different types of owners and offer the choice of management structure: member-managed or manager-managed. In a member-managed LLC, owners control company decisions. A manager-managed LLC places authority with one or more professional managers, allowing passive investors and members to be less hands-on.
Changing Management Structure
Whether it’s manager or member managed, the selection can be changed by amending the articles of organization. In most states, changing from member managed to manager managed requires unanimous approval by members. When you file articles of organization, you should include the management structure, name, address, and purpose of the LLC.
Member-Managed vs Manager-Managed
Member-managed works best if there are few active members. However, with many members, decision-making gets difficult. For LLCs with passive investors, a manager-managed structure is preferable. On public documents, it must be stated whether the LLC is member or manager-managed.
Here are considerations for each:
- Member-managed LLCs require all owners to be more involved in the day-to-day operations since they all have a say.
- Manager-managed LLCs enable passive investment and focus on broad strategy over daily tasks.
Process of Management Change
To change from manager-managed to member-managed, the Articles of Organization must be amended. The process to add an LLC member involves amending the operating agreement and a unanimous vote of the members.
Consult an attorney on which structure is best for your specific situation.
Should my single-member LLC be manager-managed? This can depend on whether you, as the sole owner, want to manage the business yourself or appoint a professional manager.
Key Differences
- A managing member runs day-to-day operations.
- A registered agent receives legal documents.
- In a manager-managed LLC, the manager or managers, who may or may not be members, are given the authority to act as agents of the company.
In California, LLCs can elect management either by their members or through a single or multiple managers. For Florida LLCs, determining the manager(s) and non-managing member(s) is crucial, with members initially voting in the managers and then potentially taking a passive role.
In Colorado, to change from a member-managed to a manager-managed LLC, the articles of organization must be amended with unanimous member approval required.
Remember, business owners can alter the management structure according to the operating agreement and state regulations.