There are many decisions to be made when forming an Arizona LLC. One is deciding whether to operate as a member managed or manager managed LLC. This information is submitted to the Arizona Corporation Commission during the formation of the LLC and the LLC will be expected to operate accordingly. We’ll go over what to consider before deciding on a member managed or manager managed LLC.
The first thing to ask yourself is who will be responsible for managing the company. This may be a single person, a separate business entity, or a combination of people and companies. Certain owners may be more comfortable with the LLC allocating management responsibilities to one, all, or one of several owners. It is important to also ask yourself if all decision makers are economic members of the business. Some members may have voting rights and other rights and privileges outside of membership interest or capital while others may not have such rights. Making sure the allocation of rights, privilege, and capital are clearly defined in the articles of organization, and an operating agreement, is recommended. It would be good form to have a contract attorney draft the operating agreement prior to forming the business entity for more complex management structures.
Your Arizona LLC’s day-to-day operation can be impacted directly by whether it is member-managed or manager-managed. The more straight-forward option is a member-managed LLC as this gives each owner authority to make company decisions. A manager-managed LLC is generally chosen for more complex management structures wherein a person, multiple persons, or one of several persons who are deemed the “manager” or “managers” of the LLC are in charge. This complexity may be due to a larger ownership structure with varying responsibilities and participation. It would be a good idea to consult with an Arizona business attorney if you are unsure which would be better for your business.