Member-Managed vs. Manager-Managed LLC

Last Updated: March 26, 2026

When filling out the Articles of Organization to start a limited liability company (LLC), an entrepreneur might trip over the question “Will the LLC be member-managed or manager-managed?” It’s a little odd, sounding like, “Should produce be farmer-farmed?” or “Should this software be programmer-programmed?” But more than an exercise in alliteration, this question is asking a business owner to make an important decision as to how their business will be run: by its members or by one or more managers (see members definition).

Like corporations, LLCs offer business owners liability protection, meaning that the liability and debts of the business are separate from those of the owners. When someone sues an LLC or corporation, they generally can’t go after the owners’s personal bank accounts. But part of the LLC’s appeal over a corporation is flexibility, including determining how the company will be run, by its members (the term for the owners of an LLC) or by one or more managers.

This guide looks at the issue of member-managed vs. manager-managed to help business owners determine what would best fit their LLC.

Member-Managed LLC

LLCs were created largely with small businesses in mind. Small companies tend to have a small number of owners, and those owners usually want to share in the decision-making and play an active role in the day-to-day operations of the business. They don’t need a big, separate system of management like a corporation’s board of directors. All LLC members have a vote in making financial and legal decisions for the company.

Most LLC owners use this management structure, and, if they don’t specify otherwise, most states will assign member-management by default. But there are reasons why a business might prefer to use manager-management.

Manager-Managed LLC

Being manager-managed simply means that the owners of the LLC appoint one or more persons to run the company. This could mean designating one or more members to be managers, hiring manager(s) from outside the LLC ownership, or both. See the manager-managed definition guide for more detailed information.

One situation in which manager-management might be preferable is when some LLC owners want to be investors in the LLC with a more passive role and don’t want to participate in the ongoing decisions, participate in day-to-day management, and daily work involved in the business.

As an example, say someone has a family business they share with their sister, Tina, and their uncle, Frank. Uncle Frank likes the business idea and wants to put up the majority of the startup capital, but he has other interests and doesn’t really want to mind the store, do inventory, make management decisions about the company, and so on. He trusts Tina and her brother to handle that. And, it’s just as well, since Tina and her brother’s faith in Uncle Frank’s decision-making abilities has waned ever since they let him pick out the drapes for the front room.

In this case, the business owner could designate their sister, Tina, or themselves (or both) to be the managing member of the LLC. Uncle Frank wouldn’t have management authority, but he’d still maintain his ownership percentage of the LLC.

LLC Management Options

How many members can an LLC have?

LLCs can have an unlimited number of members, meaning some of them can be quite large. In a multi-member LLC with many members, getting all of the members together regularly to vote on every business decision can be challenging (see multi-member LLC definition).

Consequently, LLCs with a large membership often appoint one or more members (ideally, the ones with the most business expertise) to handle the management of the company or hire a professional manager from outside the group to run things.

Another example: John Smith and some friends informally start a farmers’ market outside their hometown. As they attract more customers, they also attract more farmers who want to be a part of this successful market they’ve created. Before long, they have 30 farmers all wanting to sell their produce along with the founders, and they all decide that they would collectively benefit from making the market an LLC.

The problem is that John Smith and his fellow farmers don’t feel as confident about business management as they do about growing juicy, delicious tomatoes, and it’s hard to round up 30 people for a vote every time a business decision has to be made. So, to simplify the decision-making process, John and his farmer friends hire a professional manager with a business background to handle those aspects of the market.

Put the management plan in writing

LLCs afford their owners many choices in how to manage their company, but they don’t do any good if they aren’t spelled out on paper. Many states ask LLC founders to specify their type of management structure in their Articles of Organization or other formation documents, but in any state, it’s important to spell out their management preferences in their LLC operating agreement.

That means it’s absolutely vital for an LLC to have an operating agreement. This vital document establishes the rules for an LLC, including ownership percentages, how profits are divided, what happens when one owner wants to leave or sell their share of the business, and, of course, how the LLC will be managed.

Having an operating agreement is critical for many reasons, particularly management. If the LLC chooses member-management, the operating agreement will establish what the voting rights and obligations of each member are, along with other managerial/operational issues.

The same applies to the manager-managed structure, more so if the members are hiring a manager from outside the LLC. Without an operating agreement, how will the members establish how much authority the manager has? Will the manager make all decisions for the company, or will some, such as hiring and major purchases, be reserved for the LLC owners? If these questions aren’t answered at the start, they may be determined by the state later if conflict arises, and there’s no guarantee the owners will like the state’s decision.

Creating a comprehensive operating agreement for an LLC can be intimidating, but ZenBusiness can help with that. They offer a guided, customizable template to help get anyone started. Their chatbot walks users through the process of creating an agreement and allows for e-signature of the document.

Recommended: Creating a Manager-Managed LLC Operating Agreement

ZenBusiness can help

Now that an entrepreneur knows more about the issue of a manager-managed vs. member-managed LLC, they might be closer to forming their own limited liability company. If so, ZenBusiness’s business formation plans can help. Their operating agreement template can also make it easier to create a legal document that sets down the rules for how their LLC will be managed. Chat with one of their business professionals today to learn more.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional.