Also known as:member managed LLC · member-managed limited liability company
Written by attorneys · grounded in primary & secondary sources — see below
A governance structure for a limited liability company in which the members collectively manage the company's business and affairs. Each member possesses equal rights in management and conduct of the company's activities unless the operating agreement reallocates authority. Members in this structure also owe fiduciary duties of care and loyalty to the company and to one another.
Sources & Authorities
How it applies
Common Examples
2
Demand Before Derivative Suit
Musa Mensah and two fellow members formed a member-managed LLC to operate a retail store. After discovering that one member had diverted inventory for personal gain, Musa met with the others and requested that the LLC itself sue to recover the lost assets. When the other members refused to act within a reasonable time, Musa filed a derivative action on the LLC's behalf. The court permitted the suit to proceed because the demand requirement applicable to member-managed LLCs had been satisfied.
Fiduciary Role of Managing Members
Marco Marquez and Miguel Mendoza formed a member-managed LLC to develop real estate. Marco, who handled day-to-day operations, used company funds to pay personal expenses without disclosure. Miguel sued Marco for breach of fiduciary duty. The court held Marco liable because members exercising managerial functions in a member-managed LLC owe default duties of loyalty and care to the entity and fellow members.
Put it into practice
Test Yourself
10
Practice Questions5
· 8 primary sources
Select any source to read its text and confirm it supports the definition.
Uniform Acts
Casebooks
Hornbooks
Study Supplements
Feeley v. NHAOCG, LLC62 A.3d 649, 663 (2012)
Common questions
Frequently Asked
4
What management rights do members hold by default in a member-managed LLC?+
Each member has equal rights in the management and conduct of the company's activities and affairs. Ordinary-course decisions may be made by a majority of the members, but acts outside the ordinary course require unanimous consent unless the operating agreement provides otherwise.
Supporting sources
How does a member satisfy the demand requirement before bringing a derivative action in a member-managed LLC?+
The member must first request that the other members cause the company to bring the action. If the other members do not bring the action within a reasonable time, the member may proceed with the derivative suit.
Supporting sources
Do members in a member-managed LLC owe fiduciary duties?+
Yes. Members owe duties of loyalty and care to the company and to the other members. These duties include accounting for any benefit derived from use of company property or appropriation of a company opportunity.
Supporting sources
Can an operating agreement change the default member-managed structure?+
Yes. The agreement must expressly state that the company is or will be manager-managed, that management is vested in managers, or use words of similar import. Mere titles or internal committees do not suffice to alter the default.
Supporting sources
Business Associations Corporations and LlcsManagement and control · Members and managersUBEFoundational