What is the difference between members vs managers?
Question: by Anonymous reader
When choosing who should run my llc members or managers what are the differences?
Answer by Simon
A member is the owner of the LLC. Think of them like shareholders in a corporation.
A “manager” is a person who has the power to make decisions on behalf of the LLC.
In a member-managed LLC, the members (owners), make all the decisions. It’s sort of like running a partnership.
In a manager-managed LLC, a manager (who is not an owner/member), is hired by the owner(s) to manage the day to day operations of the company.
Before the IRS changed the rules to allow LLCs to simply choose whether to be taxed as partnerships or corporations (called “check the box” regulations), whether an LLC was manager or member-managed could impact its tax classification. There was a four part test to determine if the LLC was more like a corporation or a partnership.
This is not an issue anymore, which is good because the old system was complex and confusing.
If the members (owners) of the LLC are going to operate the LLC on a daily basis, the LLC should be member-managed.
If the members are hiring some non-owner to manage the company, then it is a manager-managed LLC and they need to appoint that person as Manager.
Comments for What is the difference between members vs managers
Thank you for your concise and to the point answer concerning members vs managers.
There are states that for a fee will do many things for you as your agent to buy an aged LLC or set up an LLC in there respective states, one thing they offer is fixing an LLC for you so that the true Members (principles) of the LLC can not be found, thus protecting them from being included in any law suits or derogatory information going on your credit record. My question is what is the process for doing this?
Thanks for your help. I’ve asked so many questions to supposed “experts” in LLC creation but no one could answer my simple question, what’s the difference between member & manager. Your short and concise answer just helped me tremendously. Thanks again.
Glad to be of help 🙂
I’m starting to learn about LLC’s. In Illinois they have started to let you online view the Management Type. A specific business entity I’m looking at is listed as Manager Type and discloses two names as managers and doesn’t list a percentage. I need to verify who is part of the LLC. If it is a Manager Type does that mean there are still owners out there?
Thanks for your help.
If everyone is strictly a member then when it comes to creating a bank account, all the members must be physically present to sign the documents. This can be a huge hassle if one or more of the members is out of state or country, etc.
The only way to avoid this is if at least one person is designated as a manager.
That helped out a lot… Thank you very much. Perfectly said. You didn’t know it but you just helped me fill out my PLC. paperwork for my business 🙂
Glad to be of help!