Managing member

by Adam
(Miami, Florida)

Question

Can you have a manager and a managing member?

What is the difference between the two?

Answer by Simon

A manager, as used in the context of a “manager-managed LLC”, is a person who is not a member of the LLC who nonetheless has the power to make decisions for the LLC.

It’s equivalent to an officer at a corporation–the shareholders “own” the corporation, but the officers run it.

The other option for operating your LLC is to have it member-managed. That is, the members (owners) operate the LLC on a day-to-day basis and make decisions for it. In a company where one member is running the day to day operations while the other members are more passive, the member operating the LLC would be the “managing member”.

The details of which members have management authority for the LLC is covered in the LLC’s operating agreement. This is why it is important for all LLCs (especially those with more than 1 member) to have a written operating agreement to prevent misunderstandings about what powers and responsibilities each member has.

There are some advanced taxation topics with using a manager-managed LLC vs. a member-managed LLC. Specifically having to do with self-employment taxes and the ability for passive members to deduct losses from the LLC on their personal tax return.


Return to LLC Operating Agreement.


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