We’ve all witnessed a manager in action – in a restaurant when they come to check on your meal, or when an ornery customer asks to “speak with the manager,” or in workplace TV shows like The Office.
But what is a manager within the context of an LLC? In short, they serve the same purpose as that restaurant manager asking about your meal: they oversee daily business activities, directing employees and establishing roles and responsibilities.
But not every LLC has managers. In fact, many LLCs go without them! So, what is an LLC manager, what is their job, and which LLCs have them?
Have no fear, curious entrepreneur. This guide will offer the answers you need to determine whether or not managers are right for your business venture.
What Is a Manager of an LLC?
LLCs have two types of management structures, and you’ll need to choose one when you start your business. The first (and more common) is management by members. This is where you and the LLC’s other owners take control of the company’s day-to-day decision-making and activities. It’s an ideal option if you’re operating on a tight budget or simply want to keep a close eye on things.
But if you’d rather take a more passive role in your LLC’s activities, and if you have the resources to hire outside help, you can bring on managers instead. These managers will handle the daily minutiae of LLC operations for you.
When you form your business, your LLC is automatically designated as a member-managed company. Keep in mind though that you always have the option to change your designation to manager-managed if things change down the line.
Why Should I Hire an LLC Manager?
There’s nothing wrong with taking a backseat in your LLC’s managerial duties. In fact, this is the most common reason for hiring managers. For example, if you’re more of a big-picture person and you’re not interested (or skilled) at directing the day-to-day details of running a company, it might be a good idea to hire a manager instead.
Similarly, some multi-member LLCs have what are known as “passive members.” Maybe they’re investors brought in after formation, or maybe they’re too busy to keep up with the daily grind of LLC management. Whatever the reason, if you have any passive members, there’s a good chance that hiring a manager is the right move for your business.
Or, just imagine a small group of members trying to manage every aspect of a huge company – it would be overwhelming and lead to internal chaos. Large LLCs often benefit from hiring managers because they can be assigned to oversee specific departments, offices, or teams. A team of managers can effectively address all the little details that the owners might not have time for.
Finally, family-run businesses often choose to designate an LLC manager. Family-owned LLCs are usually passed down from generation to generation, and if the older generation doesn’t want to burden the younger one with full responsibility for the company’s daily operations too early, they might hire an interim manager instead.
Why Should I NOT Hire an LLC Manager?
Many limited liability companies ― especially small ones ― aren’t terribly complex, so bringing in specialized managers might be overkill. Beyond that, small business owners often want to be involved in their company’s daily decisions so they can stay have a say in the LLC’s actions and direction.
If your LLC has a small and/or close-knit ownership group, member-management might be the better option, especially if your members want to take charge of managing goods and service sales, new hires, and other business functions.
This doesn’t mean that bringing in managers would be ineffective in these circumstances, but it would save your LLC money and allow members to take the active role they desire.
How Do I Designate My Management Structure?
Deciding which structure you want is the hard part. Telling the state which you’ve chosen is simple. Most states have a spot on their formation documents where you can designate whether your LLC is managed by members or managers. Just check the appropriate box and your business will be registered as such.
Then, you can provide more detail about specific managerial responsibilities and conduct in your operating agreement. This way, your partners and staff will all be on the same page.
Both of these documents have great authority as your form your LLC, but that authority isn’t final. You can always switch your management structure and revise your operating agreement if you change your mind.
Member-management is the more common route, but that doesn’t mean it’s always the right one. Hiring managers is a decision based on the unique size and type of your LLC, along with your ownership group’s desires.
If you want to tackle the company’s managerial duties, go right ahead! We have all the confidence in the world that you and your partners can handle it. But there are also plenty of businesses that can benefit from hiring outside managers to take the reins. Either way, your decision isn’t permanent – if one structure doesn’t work out, you can always change it up later.
If you haven’t yet registered an LLC, you can do so online through an incorporation service. These services will take care of all the little formation details so you can dig into managerial duties and prepare for a long future of business success!