Also known as: member-managed LLC · member managed limited liability company
Written by attorneys · grounded in primary & secondary sources — see below
A default governance structure for a limited liability company under which management authority and equal rights in the conduct of the company's activities are vested in the members collectively. The structure applies unless the operating agreement expressly states that the company is or will be manager-managed or uses words of similar import.
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Maya Malik, a member of Apex Ventures LLC, learns that the managing member diverted company funds to a personal venture. Maya first meets with the other members and requests that the LLC itself sue to recover the funds. When the members take no action within a reasonable time, Maya files a derivative action on the LLC's behalf.
Miranda Morales and two other members formed Metro Storage LLC with no operating-agreement language on management structure. Miranda alone signs a routine equipment lease for the company's storage facility. The landlord later claims the lease is invalid because only one member signed.
An LLC is member-managed unless the operating agreement expressly states that the company is or will be manager-managed, managed by managers, or that management is vested in managers. Designating one member as managing member or assigning day-to-day duties does not convert the entity to manager-managed status.
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A majority of members may decide matters in the ordinary course of the company's activities. Each member has equal rights in management and conduct of the business.
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Unanimous member consent is required for any act outside the ordinary course of the company's activities and affairs. A long-term lease or major acquisition that changes the nature of the business typically falls outside ordinary course.
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No. A member is not an agent of the LLC solely by reason of being a member. Authority to bind arises from the member's management rights in the ordinary course or from other agency principles.
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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. The demand may be excused as futile when the members are conflicted.
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