Also known as: member managed · member management
Written by attorneys · grounded in primary & secondary sources — see below
A management structure for a limited liability company under which the members themselves hold authority to manage the company's activities and affairs. Each member possesses equal rights in management and conduct of the company's affairs unless the operating agreement provides otherwise. Decisions in the ordinary course require a majority of the members counted per capita.
Maya Malik and Malcolm McKinley formed Mosaic Retail LLC as a member-managed company. Maya discovered that Malcolm had diverted company funds to a personal venture. Maya sent a written demand to Malcolm requesting that the LLC sue to recover the funds. Malcolm refused to act within a reasonable time, so Maya filed a derivative action on the LLC's behalf.
Marco Marquez, Madison Meyers, and Monica Morgan formed Morgan Financial LLC with no operating agreement addressing management. Madison proposed a long-term vendor contract. Marco objected during the members' meeting while Monica remained silent. Because each member holds equal management rights in a member-managed LLC, Madison lacked authority to bind the company without majority approval.
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The member must first make a demand on the other members requesting that they cause the company to bring the action. If the other members do not bring the action within a reasonable time, the demanding member may proceed with the derivative suit.
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Each member has equal management rights. A majority of the members counted per capita is required. One member's affirmative vote and another's express objection with the third member's silence produces no majority, so the proposed action lacks approval.
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No. A member is not an agent of the LLC solely by reason of being a member. Agency authority must arise from the operating agreement, actual or apparent authority, or other agency principles independent of mere membership status.
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The dissociated member's right to participate in management terminates immediately. The former member retains only a transferable economic interest and no longer owes prospective member-level fiduciary duties.
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