Member-managed vs. Manager-managed LLC

Limited Liability Companies (LLCs) can be member-managed or manager-managed. Members are simply the owners of an LLC, similar to how shareholders are the owners of a corporation and partners are the owners of a partnership. An LLC can have one or more members.

In a member-managed LLC, the members share in the LLC's profits and losses. They also decide how to run the LLC day-to-day. By default, LLCs in Illinois and Indiana are member-managed.

However, members can choose to make their LLC a manager-managed LLC. This means one or more of the members (or possibly a non-member) will be designated as managers, while the other members will remain regular members. Then, the managers will run the LLC day-to-day so that the remaining members can take a more passive investor role.

In member-managed LLCs, members owe fiduciary duties to each other and to the LLC. Similarly, in manager-managed LLCs, managers owe fiduciary duties to members and to the LLC. Fiduciary duties are duties imposed by law requiring one person (the fiduciary) to act with care, loyalty, etc. to serve the best interests of another (the principal).

Thickstun Luo LLC can help you start your own a small business in Illinois or Indiana and structure the business as a member-managed LLC or manager-managed LLC. Contact us today for a consultation.

LEGALESE is an online blog by Thickstun Luo LLC. The blog explains legal terms and concepts in plain English.

Disclaimer: The LEGALESE blog and the posts therein do not form an attorney-client relationship between you and Thickstun Luo LLC. Furthermore, this blog is not intended to render legal advice regarding your specific situation. You should consult an attorney for specific legal advice.