Manager-managed, and why the kit is built that way

Two roles, held separately, even when one person holds both.

The member owns the company. Ownership is a transferable interest: the right to receive distributions, and the rights the operating agreement gives the member. The Manager runs it. In a manager-managed company any matter relating to the company’s activities is decided by the Manager.

The member does not lose ultimate control by holding the company this way. Under Wyoming’s default rule, and unless the articles or operating agreement provide otherwise, the consent of all members is required to:

• selling, leasing or otherwise disposing of all or substantially all of the company’s property, outside the ordinary course
• approving a merger, conversion, continuance, transfer or domestication
• any other act outside the ordinary course of the company’s activities
• amending the operating agreement

The Manager handles the authority assigned to that role, while the member retains the approval rights provided by the governing documents and applicable state law. In a single-member company you are usually both. The value of the structure is not that different people act — it is that the documents record which role acted in each decision, which is why the agreement, the resolutions, the services agreement and the distribution declarations all exist.

This is the part most people get wrong about manager-managed LLCs, because most of what is written about the structure assumes a company with many owners and a hired manager.

A person need not be a member to be a manager — and nothing requires the Manager to be someone else. For a single-member LLC with one foreign owner, the usual arrangement is that the owner is also the Manager. One person, two roles, and documents that record which role is acting.

The Manager is chosen by the member and can be removed by the member at any time, by written consent. That is what §4.06 of the agreement in the kit provides; the Act’s default is looser still. Appointing yourself Manager gives nothing away.

Because the default is the other thing.

Check the formation filing and operating agreement together. Wyoming and Florida permit an express manager-managed designation in either document. Delaware generally looks to the LLC agreement; Texas looks to the company agreement and, if it is silent, the certificate of formation. In New Mexico, the articles must vest management in a manager. A short free operating agreement that never addresses management leaves the question to those rules.

This is also why the choice cannot be made later by deciding it. It is made by a document, which is why the existing-LLC options in the kit include a Written Consent: the Written Consent can adopt the replacement agreement, but the formation filing must also be checked and amended where state law or the existing filing requires it.

Under Wyoming law, a member is not an agent of the company solely by reason of being a member. That is true in a member-managed company too, but it matters more here: in a manager-managed company, the documents should identify who has authority to act for the company, including any Manager or separately authorized signer.

Which is why the account-opening documents in the kit name an authorized signer rather than assuming the owner can sign. A compliance officer reading your file is looking for the chain: who owns the company, who is authorized to act for it, and what document says so. The operating agreement appoints the Manager, the Bank Resolution names the signer, and the ownership statement identifies the beneficial owner.

That chain is the same whether the Manager is you or somebody else, which is what makes it readable to someone who has never met you.

Manager-managed is not a setting. It is a structure that several documents have to agree on, which is most of why the kit is a set rather than one agreement.

• The Operating Agreement states that the company is manager-managed and appoints the Manager.
• The Management Services Agreement records what the Manager does, and that the Manager’s fee is recorded separately from any distribution.
• The fee addendum sets the amount for each period without amending the agreement, in whichever of the three forms matches how the company actually pays.
• The Bank Resolution names the authorized signer and the authority that signer has.
• The written resolution is the form for recording a decision the Manager already has the power to make.
• The Declaration of Distribution is signed by the Manager, who decides the distribution; for a distribution in kind, the member also signs. It is the other side of the same separation.

What these documents do is record which role acted, on what basis, and when. What follows from that in tax terms is a question for your accountant, and nothing here answers it.

A structure people often move to eventually, and the reason to think about it now is that manager-management makes the move cheap.

Interposing a holding company changes the proposed member. The transfer and admission of the holding company must comply with the operating agreement and applicable law. The Manager appointment, services agreement, fee addendum, bank authority and ownership records should then be reviewed and updated where their terms or the bank’s requirements call for it.

The kit is built for both cases already: the operating agreement carries holding-company transfer provisions, and the ownership statement sets out direct ownership and ownership through a holding company as alternatives, identifying the ultimate beneficial owner either way.

Then the kit is not for you as it stands. Every document in it assumes a single member and an appointed Manager, and a member-managed company would need different drafting throughout rather than a changed line.

Multi-member editions of both operating agreements are in preparation. If your company has more than one member, that is the same answer.

Whether to change an existing company’s management structure is a decision to take with an attorney, and it is not one this page makes for you.