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Member vs Manager: Who Should Have What Role in Your LLC?

Business Law Tips & Advice

Attorney Nate Gilbert

Regardless of the form of LLC you decide on (Series LLC, PLLC, or regular old LLC) you will need to make the decision of whether your new Texas entity will be Manager Managed or Member Managed.  For the sake of this page, we are going to assume the owners of the LLC have chosen to have the company be managed by one or more Managers—Manager-Managed.  But now that we’ve made that decision, who should have what role in your LLC? What is the difference between those individuals who will be Managers and those who will be Members?

Who Should Be A Manager?

Our first consideration in looking at people’s roles in the new LLC vs Partnership, is to determine who will be running the business and making decisions a majority of the time.  Often times, there is a clear person in the group who is the “tip of the spear” in the business and more or less is the front man for the LLC.  This person will be a Manager, and tasked with the day to day operation of the company: entering into contracts, signing on behalf of the LLC, paying bills, and overseeing the operations of the company.  Having a capable Manager with at least a modicum of business acumen can save a larger group of Members from being bothered with having to vote and draft corporate resolutions for every little thing that comes up in the daily life of a Texas LLC.

Who Should Be A Member?

Secondly, those individuals in the business taking on the role of Member, must understand their roles and limitations.  A Member in a Manager-Managed Texas LLC will not have the authority to bind and act on behalf of the LLC without the written authorization of the LLC as a whole.  More often in a Manager-Managed LLC, the Managers run the business while the Members act as silent investors.  This structure most commonly occurs in entities like Series LLCs used to invest in real estate, where members looking to invest and accumulate passive income rely on Managers to oversee the buying, selling, and operating of the real estate investments.  Members may, however, be involved in the running of the business, but must understand their limitations on authority when acting on behalf of the business.

The Operating Agreement: Members and Managers

When consulting an attorney about your new LLC, the discussion about who will be Managers and who will be Members is an important one, and you and your colleagues may have some tough decisions to make regarding your roles.  Importantly, the Operating Agreement can also be tailored to the needs and wants of the group at large regarding the Management of the LLC—Exactly how passive or active Members want to be versus how much overall authority the Manager(s) are given can be drafted into the document by your attorney.

Regardless of your decisions on management for your business, your Series LLC, PLLC, or LLC should have an Operating Agreement that the Members and Managers of your company understand and are willing to abide by in the running of your business.  San Antonio LLC Attorney Nathaniel Gilbert helps individuals and groups form their business with a vision of success and efficiency, operating on flat fee, comprehensive representation for all of your Texas LLC needs. To learn more about Texas LLC Formation and Management, Click Here. To get in touch with Nate directly, Click Here.

Nathaniel Gilbert

Nathaniel Gilbert is the sole attorney at The Law Office of Nathaniel Gilbert, PLLC. Practicing in the areas of Business Law, Nate assist clients with LLC formation and drafting contracts in the states of Texas, Colorado, and Kansas. He can be reached at 726-999-0087.