The Structure of the Limited Liability Company


You structure your own LLC. That’s the beauty of the entity itself; no need for three tiers of power, like the General Corporation. No need to follow what others have done, or follow their rules. You dream up the ideal structure for your situation, draft it up and that’s it. Your LLC Company Agreement can be uniquely yours so that it fits the deal like a glove.

The simplest form of LLC can be one of two categories, a “Member Managed” LLC or a “Manager Managed” LLC. Each is perfectly self-explanatory. The difference is found not in the filing documents, but in the Company Agreement. Changing from one type to the other is an internal matter requiring the unanimous agreement of all members, and an amendment to the Company Agreement. This is a very easy process, so long as all members agree.
In Delaware your right to structure your LLC anyway you want is called “Freedom of Contract”. You can draft the “contract” that all members agree to follow.

What does this mean to you? Let’s look at a few examples from our clients’ experience.

Want to hold a vacation home or rental property in an entity that will shelter it (and you) from legal attacks yet provide for its long term ownership? Want to restructure a family business to divide up shares, giving the minority owners some specific ownership rights, yet giving the reins of power to the family members who actually run the business? Want to forge a strategic alliance between your company and another with stated responsibilities and predetermined profit splits? All these and so many more examples are out there. After all, business ventures are not all alike so why shouldn’t they be structured and governed according to their own unique characteristics?

Only an LLC can be used like this, and still give you entity status. All these structures can be devised by a good corporate attorney, with your input as to what specific details you want to include.  You can also start with a boilerplate agreement and draft it up yourself. I’d recommend that you have it reviewed afterwards by an attorney familiar with the intricacies of LLC law.

The aforementioned structures are simple compared to other exotic structures like the “Series LLC” and the LLC with multiple classes of members. We will do a separate blog post on each of these in the future. If you don’t require a custom structure, simply select the member managed or the manager managed LLC company agreement.  If you have question about structuring your LLC please call us. We can’t advise you on what to do, but we can help educate you on things to consider when structuring your own LLC.

More By Rick Bell

There is 1 comment left for The Structure of the Limited Liability Company

gregor brajovic said: Tuesday, March 1, 2016

I would like to open LLC company in Delaware for Referral marketing company MLM that will run wellness and beauty marketing internationally, using BGS Labs SUI licensed technology, so therefore in the future BGS Labs will acquire some equity in the company. Can you advise please? As much as i read, LLC looks like the best choice, but i would like to be advised from your side. Best regards Gregor

HBS Staff replied: Thursday, March 3, 2016

Mr. Brajovic, please feel free to call our outstanding customer support team at 1-800-345-2677 or 302-546-7400. They can advise you on any company formation questions you may have.

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