Limited Liability Company (LLC)

Management

Members of an LLC may be individuals, partnerships, limited partnerships, trusts, estates, associations, corporations, other limited liability companies, or other entities, whether domestic or foreign. An LLC therefore offers far more flexibility than an S Corporation in providing both limited liability protection and pass-through tax treatment without having to meet the requirements for electing S Corporation tax treatment.

An LLC may be formed with a single member thereby providing an owner with the limited liability protection not offered by a sole proprietorship. When there are multiple members, the structure is much like a partnership.
 
If the members are in a passive role, a manager is appointed to run the LLC’s business on a daily basis. A manager-managed LLC is more like a corporation with a board of directors and officers. An operating agreement would cover the specific duties and responsibilities of the manager.

The members have great flexibility through a written operating agreement to define their respective rights and responsibilities, powers, profit and loss-sharing arrangements, and rights or restrictions on transferring ownership interests.

Certain fundamental rights of members cannot be changed and other rights may be changed only by a written operating agreement. If no operating agreement is prepared, state LLC Acts contain “default” provisions that will apply. These fall far short of the detail covered by a well-prepared operating agreement and do not cover many essential provisions members would generally require in an operating agreement and may not reflect the intentions of the members on how they would structure their relationship or respective rights and obligations.

Officers

An LLC is not required to have officers and most don’t. They are permitted and may help define the roles of members in a member-managed LLC.