Forming a limited liability company, or LLC, often means encountering several titles that sound similar but serve very different purposes. Who is the “member”? What does the “manager” actually do? And why is someone listed as the “organizer” if that person does not own the company?
On this week’s Tuesday Tax Take, we are keeping things simple and breaking down some of the most common people and roles you may see when forming or operating an LLC.
Member
A member is an owner of an LLC. If an LLC has one owner, that person is typically referred to as the sole member. If there are multiple owners, each owner is a member. A member’s ownership may be expressed as a percentage, such as 50%, or in another manner established by the LLC’s governing documents. Depending on how the LLC is structured, members may have rights to vote on company decisions, receive distributions, participate in management, or approve certain major transactions. In simple terms, if someone asks who owns the LLC, the answer is generally its members.
Manager
A manager is a person who has authority to manage the LLC. A manager may also be a member, but does not necessarily have to own any part of the company. LLCs are commonly structured as either member-managed or manager-managed. In a member-managed LLC, the members generally participate in managing the business. In a manager-managed LLC, management authority is given to one or more designated managers. For example, an LLC could have two equal owners but designate only one of them as the manager responsible for handling the company’s day-to-day affairs. The company’s operating agreement typically explains what authority the manager has and which decisions still require approval from the members.
Organizer
The organizer is the person who takes the formal steps necessary to create the LLC, such as signing or filing the formation document with the state. The organizer does not necessarily own or manage the LLC. For example, an attorney may serve as the organizer when forming an LLC for a client. Once the LLC has been formed and the initial organizational steps have been completed, the organizer’s role is generally finished. In other words, the organizer helps create the company but does not automatically have an ongoing role in it.
Registered Agent
A registered agent is the person or company designated to receive certain official notices and legal documents on behalf of the LLC. The registered agent generally must maintain a physical address in the state where the LLC is formed or registered to do business. This gives the state, courts, and other parties an official place to deliver important documents, including service of process if the LLC is sued. Serving as registered agent does not make someone an owner or manager of the LLC. It is primarily an administrative and legal notice function.
Officer
Some LLCs also appoint officers, such as a president, vice president, secretary, or treasurer. LLCs do not necessarily need to use traditional corporate officer titles, but they may choose to do so, particularly as the business grows. An officer’s authority depends on the company’s governing documents and the authority granted by the members or managers. For example, a president may be authorized to sign contracts or oversee business operations, while a treasurer may be responsible for financial matters. It is also possible for the same person to serve in multiple roles. Someone could be a member, manager, and president of the LLC at the same time.
Authorized Signer
An authorized signer is simply someone who has been given authority to sign certain documents or enter into certain transactions on behalf of the LLC. That person might be a manager, officer, member, employee, or another authorized representative. The title itself does not necessarily indicate ownership. What matters is whether the person has actually been granted authority to act for the company. This distinction can be especially important when signing contracts, opening bank accounts, borrowing money, or completing other significant transactions.
Employees and Independent Contractors
An LLC may also have employees and independent contractors who work for the business but have no ownership or management rights simply because they perform services for the company. An employee does not become a member merely by working for the LLC, and an independent contractor does not ordinarily have authority to bind the company unless that authority has specifically been granted. This is another reason it is important to distinguish between someone’s job with the business and that person’s legal role within the LLC.
The Takeaway
One person can wear several hats in an LLC, while other roles may be filled by people who have no ownership interest at all. A member is generally an owner, a manager manages the company, an organizer helps form it, a registered agent receives official notices, and officers or other authorized individuals may be given authority to act on the LLC’s behalf. Understanding who fills each role can make LLC documents much easier to understand and can help clarify who owns the company, who manages it, and who has authority to act for it.
This article is provided for general information purposes only and should not be construed as legal advice. Those requiring legal advice are encouraged to consult with their attorney.
