Who Are Members and Managers of My LLC?
LLCs have different terminology than you might be familiar with from C corporations and partnerships. In corporations, the owners are called "shareholders". In an LLC, the owners of the business are called "members". In a corporation, the directors and officers manage the daily operation of the company. In an LLC, the day to day operations are performed by the "manager".
Members and Managers can be the same person...or not
All states allow LLCs to be managed by its members. In fact, this is the most common arrangement, where the owners of the business also run the daily operations. Some LLCs perfer to hire an outside manager to run the business.
That is acceptable as well. In that situation, the manager and members will be different people. Before the "check the box" regulations issued by the IRS in 1997, there was a potential tax consequence of using a manager who was not a member.
Without going into too much detail for a ten year-old law, what basically happened was that there was a four-part test to determine if your LLC would be taxed like a partnership or like a C corporation. One of the tests was whether the LLC had centralized, outside management. This is no longer an issue, so you don't have to worry about adverse tax consequences if you choose to use an outside manager for your LLC.
