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Manager-Managed versus Member-Managed

In Missouri — and every other State for that matter — a limited liability company is either “manager-managed” or “member-managed.” In Missouri, the election is made in the Articles of Organization and should be spelled out in greater detail in the operating agreement (“OA”).

Under the Missouri LLC Act, if the organizers of a LLC elect to be manager-managed, the managers must be named in the OA. The OA must also provide how the manager(s) are designated, appointed, or elected in detail. If, however, the OA is silent on this point the manager is appointed by a majority vote of the Members. Substantively, in a manager-managed LLC, every manager is an “agent” of the LLC wherein any act of any manager which carries on the business in the usual way of the LLC will usually bind the LLC, subject to any restrictions articulated in the OA.

A member-managed LLC, on the other hand, operates in that every members is an agent of the LLC — and the act of any member that carries on the business in its usual way will bind the LLC. Like with managers, a member’s authority can be limited in the OA.

Because the choice between a member or manager managed LLC will determine who makes the decisions, and because the parameters of this election needs to be fleshed out in detail, it is a good idea to consult with legal counsel before making this decision.

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