What is the difference?
| Member-managed | Manager-managed | |
|---|---|---|
| Who runs the business | All the members | One or more managers |
| Who can sign contracts | Generally any member | The managers |
| Role of the other members | Active owners | Can be passive, voting only on major decisions |
| Who the managers are | The members themselves | One member, several members, or someone who is not an owner |
| Suits | Single owners and small teams who all work in the business | LLCs with investors, family LLCs, and owners who hire someone to run things |
Where is the choice recorded?
In two places. Many states ask for it on the formation document: Texas's Certificate of Formation states whether the LLC is governed by managers or by members and names them, and Nevada's Articles and yearly lists name the managers or managing members. Wyoming and Delaware do not ask at all. The operating agreement then sets the detail: what managers can do alone, what needs a member vote, and how managers are appointed and removed. See LLC operating agreement and Articles of Organization explained.
Why does it matter to banks and customers?
Because it decides who can bind the company. In a member-managed LLC, each member can usually commit the LLC in the ordinary course of business. In a manager-managed LLC, only the managers can, and a member who is not a manager has no authority to sign. Banks ask for the operating agreement to see who may open and operate the account, and the IRS asks for a responsible party, the individual who controls the entity, on the EIN application.
Does it change how the LLC is taxed?
It does not change the tax classification. A single-member LLC is disregarded and a multi-member LLC is a partnership by default, whichever way it is managed. See how LLCs are taxed.
It can affect self-employment tax. Members who work in the business pay it on their share of profit. Whether a member who does not manage can treat their share like a limited partner's, which is not subject to that tax, is unsettled. The IRS and the courts look at what the member actually does, not at the label in the documents, so take advice before relying on it. See self-employment tax explained.
Does it affect what is public?
In states that put management on the public record, a manager-managed LLC discloses its managers, not necessarily all of its owners. Owners who want their own names kept off a state's website sometimes choose the structure for that reason. It does not change what banks or the IRS are told.
Which should you choose?
- Member-managed if every owner works in the business and you are content for each to sign for it.
- Manager-managed if some owners are investors only, if there are many owners, or if you want one person with clear authority, whether or not that person is an owner.
- Single-member LLCs are usually member-managed. Some owners choose manager-managed so that a named manager can act if the owner cannot.
Can you change it later?
Yes. Amend the operating agreement and, in states where the formation document states the structure, file an amendment with the state. If the person who controls the LLC changes, tell the bank, and report the new responsible party to the IRS on Form 8822-B within 60 days.
Not sure how to structure management?
We set up the structure that fits your owners, record it correctly in the state filing and the operating agreement, and update it when things change.
Questions people ask
What is the difference between a member-managed and a manager-managed LLC?
In a member-managed LLC the owners run the business. In a manager-managed LLC they appoint one or more managers to run it, and members who are not managers step back.
Which is the default, member-managed or manager-managed?
Member-managed, in most states, unless the formation document or operating agreement says otherwise.
Can an LLC manager be someone who is not an owner?
Yes. A manager can be a member or an outside person or company.
Should a single-member LLC be manager-managed?
Usually not. Most are member-managed, though some owners appoint a manager so someone else can act if they cannot.
Sources
Every fee, date and rule on this page was taken from these official and primary sources.
- Revised Uniform Limited Liability Company Act: management of a limited liability company
- IRS: Form 8822-B, Change of Address or Responsible Party
- IRS: Self-employment tax (Social Security and Medicare taxes)
- Texas Secretary of State: Form 205, Certificate of Formation, Limited Liability Company
Rules and fees change. If you are reading this long after October 1, 2026, confirm the figures with the source before you rely on them.
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This guide is general information. It is not tax or legal advice for your situation.