When you form an LLC you choose who runs it. The choice goes in your operating agreement, and many states also ask for it in the formation filing.
Member-managed
The owners (members) run the business together. Each member can usually act for the LLC — sign contracts, open accounts — unless your operating agreement limits that. This is the usual choice for single-owner LLCs and for small partnerships where everyone works in the business.
Manager-managed
One or more managers run the business; the other members are passive owners who vote only on major decisions (selling the business, admitting a member, changing the agreement). Managers can be members or outsiders. This fits when:
- Some owners are investors who will not work in the business.
- You want one clear decision-maker for banks and customers.
- The LLC holds property for a family, with one person managing it.
What changes in your documents
- The formation filing may list the managers instead of (or as well as) the members.
- The operating agreement says who can sign for the LLC and which decisions need the members’ vote.
- Banks will ask to see who has authority — usually the managers, or every member in a member-managed LLC.
Taxes are the same
Management does not change how the IRS taxes the LLC. A single-member LLC is taxed as a sole proprietorship by default and a multi-member LLC as a partnership, unless you elect to be taxed as a corporation.
You can switch later by amending your operating agreement (and, if your state recorded it, filing an amendment).