An LLC provides greater asset protection against creditors, which is one of the primary factors to consider when choosing it as your business entity.
Decision-making about whether your Delaware LLC will be member-managed or manager-managed is crucial, so before filing your articles of organization it must be made.
Advantages
Member-managed LLCs offer many advantages to small businesses where all owners, or “members,” desire active involvement in decision making and governance of the company. This structure can also take advantage of certain tax benefits such as flow-through treatment and passive loss treatment to provide additional tax savings to its members.
An LLC with members, however, requires more responsibility and liability from its members compared to an organization run by managers alone. Since these members make decisions that impact business operations directly, any actions that negatively affect them could potentially become liabilities for their actions that may impact other areas. As such, some smaller enterprises opt for manager-managed organizations instead.
Member-managed LLCs present another disadvantage that prompts some larger companies to switch over to manager management: getting all members on board with management decisions can be challenging, which can make family-owned businesses especially problematic. Investors also may not find such structures appealing as they cannot diversify investments or recover losses quickly enough.
One advantage of manager-managed LLCs is that they reduce the potential for disagreement among governing members. A manager-managed LLC will usually have an operating agreement that outlines specific regulations and assigns authority to its managers – this helps avoid conflict among governing members while simultaneously clarifying identity to third parties.
An operating agreement can stipulate when managers will have ultimate authority in certain situations or that governing members can overrule a manager’s decision, create committees or groups of members with distinct rights and responsibilities, as well as establish the company as multi-class LLC that allows founders to establish distinct classes of members with differing economic, reporting and voting rights.
Selecting an operating agreement is essential in maintaining the legal standing and customer relationships for your LLC. An operating agreement outlines specific rules that will help define how it functions and will maintain its identity in court proceedings as well as with customers. Experienced Delaware LLC lawyers can be invaluable when setting up a new company in Delaware. Their knowledge of state laws and their ability to advise on optimal structures are both invaluable assets when creating the documentation for an LLC in this state. Lawyers can also assist with other aspects of setting up an LLC, such as opening bank accounts and creating employee handbooks. Furthermore, they can assist with securing any necessary licenses or permits that your business requires for operation. Get in touch with an experienced attorney today to set up a consultation meeting! Learn about the Delaware series LLC, which provides significant protections against assets and liabilities when moving between business ventures. It is an intricate structure; therefore, an attorney should be available to answer any queries that you have about it.
