Member-Managed vs. Manager-Managed LLCs: What’s the Difference?
- Michael Hayes
- Dec 22, 2025
- 3 min read
Forming a company is one of the most empowering and fulfilling decisions one can make as an entrepreneur. It’s where the rubber meets the road. Where you walk the walk not just talk the talk. Where you cross the Rubicon that separates dreamers from doers.
Like many bold moves, it can also be fraught with uncertainty. If you’ve decided to form a Limited Liability Company (LLC), one of the most typical elements of uncertainty is the management of the company and the somewhat non-intuitive question: will you be member-managed or manager-managed?
In this blog post, we will explain the difference between a member-managed LLC and a manager-managed LLC and suggest which one might be best for you. As always, if you have questions about your specific situation, don’t hesitate to schedule a FREE consultation.
LLC Management
LLCs, like any company, require management. Someone, or some group of someones, must make the decisions. The choice between member-managed and manager-managed is not actually about who will manage as much as it is about who your members are and what involvement you want them to have in the operation of the business. Let’s break that down.
Member-Managed LLC
In a member-managed LLC, all owners (members) take an active role in running the business. Each member typically has authority to make decisions, enter into contracts and manage day-to-day operations. This structure works well for small businesses where the owners are closely involved. Family businesses, professional practices or startups with a hands-on founding team typically chooser a member-managed structure for their LLC.
Manager-Managed LLC
Alternatively, a manager-managed LLC separates ownership from management. The members appoint one or more managers to run the business. These managers may be members, but they also might be outside professionals. In this scenario, all the other members would typically be considered non-managing members and would act more like passive investors, with limited involvement in decisionmaking and daily operations. This structure is common for larger LLCs, real estate ventures, or companies with multiple investors who don’t want to be involved in management decisions.
Which Management Structure is Best?
The choice between these two structures affects more than just daily operations. Besides obviously influencing decisionmaking authority and fiduciary duties, it affects how the LLC appears to banks or investors and even how disputes are resolved. Remember, in a member-managed LLC, all members are in charge of running the business. Each member can make decisions about how the company is run, and can bind the LLC in contracts and agreements, even if decisionmaking and contracts are not their strong suit. It makes sense for an LLC with a small number of members, but exponentially increases the risk of operational dysfunction for LLCs with a large number of members.
Conclusion
There’s no one-size-fits-all answer. The right choice depends on your business goals, the number of owners, and how involved you want members to be in running the company. Consulting with a business attorney can help ensure your LLC is structured properly from the start.
Spiller Law is a San Francisco business, entertainment and estate planning law firm. We serve clients in the San Francisco Bay Area, Silicon Valley, Los Angeles, and California. Feel free to arrange a free consultation using the Schedule Appointment link on our website. For other questions, call our offices at 415-991-7298.
The information provided in this article is for general informational purposes only and should not be construed as legal advice or opinion. Readers are advised to consult with their legal counsel for specific advice.
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