QUESTION: I’m starting a business with investors. Should I consider a “member-managed” or “manager-managed” limited liability company?
ANSWER: Your choice ultimately depends on who you want running your company.
The most popular choice is usually “member-managed,” which means all members of the LLC (i.e. the owners or in this case, you and your investors) pitch in and take responsibility for running the business – an all-hands-on-deck affair where all members of the LLC are helping out on a daily basis. By default, LLCs are usually designated as member-managed under state law unless specified otherwise in an operating agreement.
If you specify for a manager-managed LLC, this means responsibilities may be delegated to owners and non-owners alike. For instance, you may have an owner who is good at executing ideas but lacks expertise in managing a group. This helps balance out the duties and responsibilities to everyone. You may even delegate some leadership responsibilities to someone outside of the LLC who is especially skilled in that area.
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