Members vs. Managers: What to Know About Members and Managers in a Florida LLC
Updated: November 10, 2023
The owners of a limited liability company (LLC) are called members. They can manage the LLC themselves (member-managed), hire others to manage the LLC on their behalf (manager-managed), or choose a combination of members and managers to run the company together. We form most of our client’s LLCs as member-managed by default. We find that it’s the easiest way to manage an LLC while minimizing costs and maintenance requirements, which is a part of why it’s the method chosen by most small business owners.
What Responsibilities Go into Managing a Florida LLC?
Regardless of which management style you choose for your Florida LLC, the appointed manager(s) will be officially in charge of attending to various business on behalf of the company. While a manager’s specific responsibilities can ultimately be whatever the members want them to be (within legal limitations), some common tasks and responsibilities that are often delegated to them include:
- Making major decisions on behalf of the LLC
- Hiring employees and independent contractors
- Running daily operations
- Signing and binding the LLC to contracts and other agreements
- Representing the LLC in court
- Resolving disputes and solving other problems within the company
What is a Member of a Florida LLC?
The members are defined by their ownership of the Florida LLC, and they usually contribute the capital that’s used to start the business. As the name implies, members in a member-managed LLC have full and direct control of the LLC. Normally, one or two members will be intimately involved in the day-to-day operations of the LLC while the rest remain passive, non-active investors.
In a manager-managed Florida LLC, however, the members as a group are often not active participants. Other than electing managers and voting on certain key events during the LLC’s lifecycle, the members of a manager-managed LLC sit back and let the managers run their company. This is much like how a corporation is managed by directors and officers on behalf of its shareholders.
What are the Advantages of a Member-Managed Florida LLC?
- The Florida LLC’s members have more control over the business.
- All of the members get to have an equal amount of input when it comes to making decisions.
- Member-managed LLCs have a more simplified management structure when compared to manager-managed LLCs.
- This type of management makes it easier for the members to collaborate and work with each other.
- Member-managers won’t come with the same additional salary requirements as hired managers.
What are the Disadvantages of a Member-Managed Florida LLC?
- The Florida LLC can have more of a challenge attracting investors who would be more interested in a passive role.
- Managing a business is a job in and of itself, which will require significant commitments from the managing members.
- There can be more opportunities for disagreements and disputes between the Florida LLC’s members.
- Reaching the necessary level of agreement can be time-consuming, depending on the members and the terms of the Florida LLC’s operating agreement.
What is a Manager’s Job in a Manager-Managed Florida LLC?
Managers are elected or appointed by a Florida LLC’s members. When the company is just starting out, these individuals are specified in the operating agreement. After that, the members can hold regular meetings to elect managers, assuming that this is allowed by the operating agreement as well. Managers oversee the business and the general dealings of the LLC and can exercise the LLC’s powers. They can either perform these responsibilities themselves or delegate these tasks to officers and employees under their authority.
When carrying out these responsibilities, the Florida Revised Limited Liability Company Act (“the Act”) requires that managers abide by the same fiduciary duties that partners are held to in a partnership. The Florida LLC’s members can modify and refine the manager’s fiduciary duties in their company’s operating agreement. Typically, the operating agreement will specify requirements such as the “duty of loyalty” and the “duty of care,” for the managers of a Florida LLC.
What are the Advantages of a Manager-Managed Florida LLC?
- Manager-managed LLCs are often more appealing to potential investors.
- This management structure allows the Florida LLC’s members to act as passive investors themselves.
- It can also help streamline and centralize management for larger LLCs with many members.
- Hiring managers allows the members to benefit from their qualifications and experience.
- This setup also typically allows the managers to make decisions faster and makes it easier to react to situations as they develop.
What are the Disadvantages of a Manager-Managed Florida LLC?
- The members of a manager-managed Florida LLC won’t be able to take part in all of the company’s decisions.
- The Florida LLC’s operating agreement will need to be very detailed when specifying how much authority will be given to the managers.
- It will take time for the manager(s) to learn about the business and how it should operate.
- Managers will require additional expenses, primarily when it comes to paying their salary.
Florida LLC Management, Operating Agreements, and Why You Want an Attorney’s Help
An operating agreement, while not required by Florida law, is still a vital document for managing an LLC. This is true for both member-managed LLCs and manager-managed LLCs. However, different provisions will be better suited for each management style. Without an operating agreement, the rules for your LLC will default to those provided by the Act, which won’t always be the best option for your company.
To further complicate things, the specifics of your LLC’s operating agreement will also be determined by the company’s unique needs as well. Because of this, it’s important to have a lawyer’s assistance with drafting this document. Click here to learn more about how FL Patel Law PLLC can help with your Florida LLC’s operating agreement.
Should I Talk to FL Patel Law PLLC’s Attorney About How to Manage My Florida LLC?
Your business’s future success will be significantly determined by the choices you make when starting out. Whether you’re still trying to decide on a business entity type or which management style is best for your Florida LLC, the right legal guidance can help get you pointed in the right direction. Attorney Patel’s experience as both a lawyer and an entrepreneur mean that he’s equipped with useful advice and information for all sorts of business and legal matters. Schedule your initial consultation with us now for more help.
Looking to start a business or grow your current business? Contact FL Patel Law PLLC today by visiting our website or calling 727-279-5037.
