In a LLC structure, is there a difference between being called or titled a Managing Member vs being titled or called Member?

– Spencer, New York


Answer

First off, lets define the difference between Member-Managed vs Manager-Managed.

Basically, a Member-Managed LLC is one where the members, typically the owners, make the day-to-day decisions of the business.  A Manager-Managed LLC is one where the members act more as a board of directors and hire a manager to manage the day-to-day decisions.

All Managing Members are Members, but not all Members are Managing Members.

Managing Members are those specifically able to bind the Limited Liability Company contractually. In the legal world, they have “actual authority” to contract on the LLC’s behalf.

Members may or may not be able to bind the LLC contractually, and doctrines like “apparent authority” and “actual authority” come into play. If the member is authorized as an agent (and is typically listed by name in the Articles of Organization) to execute contracts on behalf of the LLC, the member is said to have actual authority. However, a member who does not have actual authority can nonetheless bind the LLC if that member has apparent authority.

The Managing Members should be the people who are transacting the business of the LLC and should be thought of like the executives of the LLC as they are actively involved with day-to-day operations. Not all LLCs will have a Managing Member.

Another aspect of being a Managing Member vs a Member is the extent of fiduciary duties. Depending on how the operating agreement is written, a Managing Member may have more responsibilities (and possibly liability) than just being a Member. This can vary by state too, so be sure to verify.

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