The Manager Managed LLC
A manager managed LLC is typically a good way to go. When you form a Missouri LLC, you have to state in the articles of organization whether the LLC will be managed by managers or by the members. (Member is just another word for owner.) The manager managed LLC has several advantages.
Advantages of a Manager Managed LLC
A manager managed LLC has two big advantages. First, it allows the members to put the day-to-day management of the LLC in the hands of non-members. Second, it allows a single-member LLC to appoint someone to run the business when the member cannot. (A single-member LLC is simply an LLC owned by one person.) Starting with this second advantage, a member might not be able to act on behalf of the LLC when the member is out of town, busy doing other things, incapacitated, or worse. Appointing a spouse, adult child, or other trusted person as a co-manager allows that person to do whatever the member authorizes. (A member can also be a manager.) For example, the member might authorize the co-manager to sign contracts, deeds, promissory notes, or any other instruments on behalf of the LLC. Having someone who can periodically stand-in for the member to sign such documents is helpful. In a worse-case scenario, who will tend to the business if the member is incapacitated or deceased? If there is no other member or manager, then the answer is no one. At least not without a court order, which takes time and money to get.
The first advantage typically exists in the context of a larger enterprise. The business is too big for the member or members to run by themselves. They need to appoint people who can make day-to-day business decisions, access LLC money, and sign documents on behalf of the LLC. In this larger company, the members might function like a board of directors. They make the big decisions affecting the LLC, like whether to admit new members, whether to merge the LLC with another entity, whether to dissolve the LLC, and whether to amend the articles of organization or the operating agreement. But even in a manager managed LLC, the members remain in control of the managers. For example, the members decide who to appoint as managers, when to terminate a manager, what authority a manager will possess, and whether to change that authority.
A manager managed LLC is usually a good call. Taking the time to think about what authority to grant to a manager and clearly communicating that in the operating agreement can help avoid problems down the road.
This article is for general informational purposes only. It is not intended as legal advice.
Sewell Law provides representation in business and real estate matters and in civil litigation. Please contact Michael Sewell, JD, MBA, at (314) 942-3232 or at michael@SewellLaw.net to discuss your legal matter.
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