After evaluating the advantages and disadvantages of each type of business entity structure, perhaps you ultimately decide to organize your company as a limited liability company (LLC). Next, you have to decide how to structure the management of your LLC. The LLC’s popularity is partly due to its adaptability and flexibility in accommodating management styles.
You can organize your LLC so it mirrors the management style of a general partnership. This would be a Member-Managed LLC. Each of the members in the LLC has an equal vote (or a vote consistent with their ownership percentage) in the LLC and each of the members is authorized to bind the company in a contract.
You can organize your LLC so it more closely resembles a corporation or a limited partnership. You can even have a Board of Directors. LLC’s selecting a corporate of LP management style might also elect to make the LLC manager-managed. In a manager-managed LLC, elected managers run the company’s day-to-day affairs. Managers can be members of the LLC but they are not required to be. This might be the route you choose if your company will have owners who do not actively participate in the day-to-day management of the company.
You can also choose a hybrid or combination management style. For example, most of the power might reside in one or a few members with the other members being silent on most matters but having a vote on major company decisions (e.g., the company going into a new line of business).
In most states, the default for LLC management is member-managed. If you want the LLC to be manager-managed, you must specify that in your LLC operating agreement. Some states also require that the election to be a manager-managed LLC be indicated in the articles of organization.
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