Also known as: member-managed LLC · member managed LLC · member managed LLCs · member-managed limited liability company
Written by attorneys · grounded in primary & secondary sources — see below
A governance structure for a limited liability company in which management and conduct of the company's activities are vested in the members. Each member holds equal rights in management unless the operating agreement provides otherwise, with ordinary-course matters decided by majority vote and matters outside the ordinary course requiring unanimous consent.
Mohan Malhotra and Mason McCarthy formed a member-managed LLC to operate a retail store. Mohan discovered that Mason had diverted company funds to a personal venture. Mohan met with Mason and the other members to request that the LLC sue Mason for recovery. When the members refused to act within a reasonable time, Mohan filed a derivative action on the LLC's behalf.
Maya Malik and Mariam Mansour formed a member-managed LLC that later faced a derivative suit alleging self-dealing by Maya. The non-party members voted to appoint a special litigation committee of disinterested members to investigate the claims and determine whether pursuit served the company's best interests.
Select any source to read its text and confirm it supports the definition.
An LLC is member-managed by default unless the operating agreement expressly states that the company is or will be manager-managed or that management is vested in managers.
Supporting sources
Yes. Each member has equal rights in the management and conduct of the company's activities and affairs regardless of relative ownership percentages unless the operating agreement alters that rule.
Supporting sources
The member must first make a demand on the other members requesting that they cause the company to bring the action, and the members must fail to bring the action within a reasonable time, unless demand is excused as futile.
Supporting sources
A majority of the members may decide matters in the ordinary course of the company's activities unless the operating agreement provides otherwise.
Supporting sources