A Limited Liability Company can decide whether to be manager managed or member managed. When manager managed, one or more managers will make the pertinent business decisions for the LLC. Having an LLC manager can have its advantages and disadvantages. A Denver business attorney from The McGuire Law Firm has prepared the article and video below to discuss a manager managed LLC.
A manager for an LLC may be beneficial when the LLC has many members, and maybe more so when these members are passive and do not actively participate in the day to day operations of the business. Under such a situation, a manager well versed in operating a business such as an LLC and with experience in the business industry the business is operating in, may work well for the company. On the other hand, if the members of the LLC are few or fewer, and these members actively participate in operating the business each day, then the members themselves may want to manage the LLC, and thus the LLC would be member managed. Each business and the business owners must make important decisions as to how a business will operate and no two businesses will operate in entirely the same manner. That being said, you may find it more likely to see a manager managed LLC when there are a larger number of members (maybe eight to ten or significantly more) and/or some or the majority of the members are not actively involved with the business operations. For example, if thirty individuals invested in a partnership that was purchasing and selling real estate and most of the members were passive investors, and real estate was not their expertise, you may find this LLC to be manager managed. However, if three individuals formed an LLC to purchase and sell real estate and one was a real estate broker, the other a contractor to fix up the houses and the third an attorney to draft up the partnership documents and contracts, this LLC would probably be more likely to be member managed.
As stated above, the choice to be manager managed or member managed is a question that will be answered by the business owners and typically the overall size of the business, nature of the business and day to day involvement of the partners. There is no right or wrong answer for each business, and an LLC that begins as a member managed LLC, may end up choosing to be a manager managed LLC after the business operates and the partners see the need for one or a few individuals to be making certain decisions for the business.
If you have questions regarding the operation of your LLC or other business issues speak with a Denver business attorney and tax attorney at The McGuire Law Firm.