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How to Document Members in an LLC in Delaware
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How to Document Members in an LLC in Delaware


By Andrew Millman Tuesday, September 9, 2014

structure of llcAt Harvard Business Services, Inc., we often hear this question: "In my Delaware LLC, what's the difference between a member, a manager and a managing-member?"

People also wonder: 

“Do the members own the LLC?”

 “Do the members run the LLC?” 

"Should my LLC be member-managed or manager-managed?”

"What is the best way to structure an LLC?"

There are different ways to show membership in a Delaware LLC:

A member, by definition, is an owner of an LLC with a vested interest in the company. Members can be people or entities from anywhere in the world. Typically, the rights and responsibilities of members are listed and explained in the LLC’s Operating Agreement. It is not required that all members have the same rights. The Operating Agreement may spell out different rights for specific members.

In addition, there may be different classes of members with specific rights for each class, as long as these classes are clearly stated in the LLC's Operating Agreement. Remember, once the Operating Agreement is finalized and ratified by all members, it cannot be changed without the unanimous vote of the members. An amended Operating Agreement must be signed by all the members of the LLC.

A member of an LLC may also function as a manager, but an LLC does not need a manager; members can run the company on their own. As for managing-member vs member classifications, it is simple: when a member is also a manager, s/he is usually referred to as a "managing-member."

A manager is an individual or entity chosen by the members of an LLC to manage the daily operations of the LLC. A manager can be, but does not have to be, a member. Typically, managers are in charge of overseeing day-to-day activities but don’t possess ownership interest in the company. In some cases, when the LLC is 100% manager-managed, the manager is in charge of everything. The member-managed LLC Operating Agreement would state these responsibilities. Harvard Business Services, Inc. is happy to share this template of a member-managed Operating Agreement with you.

Members of a Delaware LLC don’t own stock, like corporate shareholders do. Members usually split the company into percentages of ownership, or membership units. Members are typically issued membership certificates rather than stock certificates, which indicate the percentage owned or the number of membership units they own.

If you are considering forming a Delaware LLC and have further questions about the role and responsibilities of members, or how to structure an LLC, you can call (800-345-2677), live chat with us or email Harvard Business Services, Inc. to speak with a specialist on these matters.

 

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