Limited liability companies, or LLCs are the most popular business entity type for entrepreneurs. Small business owners prefer LLCs due to their flexibility and simplicity. Unlike corporations, the structure of LLCs does not come with strict requirements. LLC owners are free to run their company the way that they see best.
This flexibility however often leads to questions like: “Do I need a president for my LLC?” or “How do I structure my LLC’s management?”.
Here we discuss some of the ins and outs of managing an LLC, including the titles that LLC managers should have.
Does an LLC Need to Have a President?
LLCs are generally not required to name a president. Each state has different laws for forming LLCs, however, most states give LLC owners freedom to structure their company how they want. This includes whether to appoint officer titles in the company or not.
Do LLCS Have Officers?
If you’re an LLC owner, you may be thinking about structuring your business with officer positions. Many LLCs do appoint officers as a way to clearly define individual responsibilities in the company. Let’s discuss the three key roles most LLCs consider: president, treasurer, and secretary:
- LLC President or CEO: The president, or CEO, is generally the top decision maker in the LLC. This role sets the direction for the business. They decide on major company decisions and align the company with its goals.
As the central figure, the president or CEO will be the primary voice in strategic decisions. They’ll guide the company’s mission and interact with significant business partners or stakeholders when needed.
- LLC Treasurer or CFO: The LLC treasurer, sometimes known as the CFO, is in charge of the company’s general finances. This role ensures the financial health of the business. They manage the money, from daily expenses to bigger investments.
The treasurer is tasked with keeping an eye on cash flow, preparing financial reports, and setting financial strategies to make sure the company grows sustainably.
- LLC Secretary: The LLC secretary is primarily responsible for the company’s organization and recordkeeping. They manage crucial business records and help with important filings, like the Delaware Annual Franchise tax.
The secretary’s duties include documenting meeting outcomes, keeping track of business filings, and ensuring the company stays on top of regulatory requirements, like paying annual taxes and other key deadlines.
How are LLCs Managed?
LLCs can set up their management structure in one of two ways: Member-Managed, or Manager Managed.
In Member-Managed LLCs, the LLC Members are both owners and also handle the daily operations of the business. Each Member of a Member-Managed LLC has the authority to sign contracts on behalf of the company, hire employees and open business bank accounts.
Single-Member LLCs are the most common example of Member-Managed LLCs. The single Member is the sole owner of the company and also manages the daily business operations.
LLCs can also be Manager-Managed. The Members in a Manager-Managed LLC still make strategic decisions for the company. However, they appoint a third-party Manager (or Managers) to run daily business operations. The Manager-Managed LLC model is similar to traditional corporations, where a board of directors makes decisions that are then carried out by executives.
How to Appoint an LLC President: 3 Steps
LLC owners should follow these steps when appointing a president, or any new officer in the company:
Step 1: Consult the Operating Agreement
LLC Members should consult the LLC Operating Agreement before appointing any officers within the company. The Operating Agreement is the foundational document that guides how the company operates.
LLC Operating Agreements often have specific provisions that outline the procedures for appointing new officers. Members should ensure that they follow the agreed upon steps so they avoid any problems or disputes in the future.
Step 2: Hold a Member Vote:
Appointing a president in an LLC often requires holding a vote amongst Members. LLC Members should hold a formal vote and clearly document the results.
Appointing officers in a company should be a joint decision. All Members with voting rights in the company should have a say in the appointment process.
Step 3: Sign an Amended and Restated Operating Agreement
Once a decision has been made, it is essential to update the company’s LLC Operating Agreement. The LLC Members need to prepare an “Amended and Restated Operating Agreement” that includes the new president’s name and clearly outlines their responsibilities.
Every Member must sign the Amended and Restated Operating Agreement to make it official and binding. The Agreement can then be stored with the company’s other important internal documents.
What is the LLC Operating Agreement?
The LLC Operating Agreement is the company document that details the ownership and management structure of an LLC. Operating Agreements are private contracts between the LLC Members that establish how the company is going to be run.
LLC Members are free to structure the company whichever way they want, so long as they agree to it in the Operating Agreement. The LLC Operating Agreement should list the names and responsibilities of any Managers or officers in the company. Each Member signs the Operating Agreement to make it official