LLC Management
There are two basic ways to manage LLC.
- Member managed - Most LLCs are member managed. This means that all the members jointly run the business.
- Manager managed - This means that they designate one or more members to be managers or perhaps they hire one or more outside managers.
An LLC must have at least one organizer, who signs the articles of organization. Organizers do not have to be members or managers of the LLC. The registered agent of the LLC may be an individual resident of Missouri or a domestic or foreign corporation registered to do business in the state. The decision regarding the management form of the LLC must be made by the time the articles of organization are completed. When applying the default approach, the LLC is run by its member or members, in the same manner as a general partnership is run by its partners. If a manager is selected to run the LLC, the member or members have no rights to participate in most aspects of the LLC's management. In this case the member or members are essentially passive investors, similar to partners in a limited partnership or shareholders in a corporation.
Points considered to effectively manage an LLC
There are very important points that must be considered in order to effectively manage an LLC:
- Executing an Operating Agreement and preserving its integrity. This is the agreement that governs the operation and management of an LLC, and is the closest thing to a Corporate Formality that an LLC experiences. This is the place where all of the distribution, taxation, and goals of an LLC should be clearly outlined so that there is no question of intent as to each of these points. This is also the place where any special privileges to key members are outlined.
- Ensure that there is adequate capitalization for the formation, operation, and maintenance of the LLC. This is another management area that comes under close court scrutiny whenever the LLC status is brought into question. Inadequate capitalization may reek of fraud to the court and may lead to a piercing of the LLC veil. It is the Managing Member’s responsibility and directive to ensure that LLC funds are properly managed, and that there is no misuse of funds or excessive or unnecessary depletion of assets by the members. Improper use of funds or leaving not enough operating capital in the coffers is a sure-fire way to attract untoward regulatory or court attention and lead to a piercing of the veil.
- The Managing Member should ensure that there is absolutely no Co-mingling of funds. This means that in no way should any of the LLC funds be used for personal purposes or advantage by members, nor should members be directly responsible for the payment or guarantee of an LLC debt or financial obligation. Any form of personal use of corporate funds or assets will most assuredly lead to an alter-ego interpretation by the court or regulatory agencies which inevitably leads to a loss of LLC status and all the protections afforded by such status.
- All Members should adhere to the principles outlined by the Operating Agreement, and understand that all official actions on behalf of the LLC should be applied against a “in the best interest of the LLC” standard to ensure that there are no personal agendas proffered at the expense of the health of the LLC. Any actions to the contrary can also lead to an alter-ego determination by the court and result once again in the piercing of the LLC veil.