My business partner and I wish to elect for a member-managed LLC. I am slightly unsure how to proceed with finalizing my operating agreement taken from your book, however, as the language states that "the Company shall be managed by one or more appointed Managers." As I scale the size of my operation over the next several years, I expect to hire employees to manage functional departments (e.g. marketing, sales, engineering, etc.). How are these functional managers different from "Managers" as stated in the operating agreement template? Thanks, David
Really great questions! The sample Operating Agreement I included [in Limited Liability Companies for Dummies] is just supposed to serve as a template. If you wish to tailor it to your member-managed company then you need to go through and make sure that the document is congruent in reference to being "member-managed" (as opposed to "manager-managed"). In the provision you specified, you can replace it with something along the lines of the following: "The Voting Members shall manage the Company. In their capacity as Managers, they shall have the right to make decisions and vote upon all matters as specified in this Agreement in proportion to their respective ownership percentage of the company. Voting members need not identify whether or not they are acting as a Member or Manager when they take action." "Non-voting Members have no right to participate in the management of the Company, nor vote on any matters of the Company. No Non-voting Member shall take any action or enter into any contract or obligation on behalf of the Company without the prior written consent of all of the Voting Members. Likewise, no Non-voting Member shall perform any act that is in any way pertaining to the Company or its assets." Now, in regards to your employees, the question you need to ask yourself is whether or not you and your partner want to comply with the above statement.
If you wish to give your employees full managerial powers then you may be better off being Manager-Managed and assigning your various employees as managers along with yourselves, or if you are set on your LLC being Member-Managed, then you can allow for specific contractual exceptions which you can outline in your Operating Agreement. One of the great things about LLCs is that they are very versatile. You have a lot of room to maneuver, just make sure it is explicitly and contractually stated and understood by all. Hope this answers your question! - Jen
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