A limited liability corporation is a term often used to describe an LLC under state law.  The LLC laws of most states do not require that an LLC have officers.

An officer typically includes a President, Treasurer and Secretary.  Each of these officer roles were traditionally defined in the corporation legal structure and each of them has defined roles and authority when operating a business.

While officers are not legally required for a limited liability corporation, it is recommended that one have officers.  This is because it is expected that a serious business will have senior officers.  As a business, you will need to interact and conduct transactions with other parties such as banks, suppliers, partners, government agencies and landlords.

Each of these parties will want to know who the senior officers are and who has authority to act and make decisions on behalf of the LLC business.

Rather than risk losing the business transaction or losing credibility with your business colleagues, it is the better path to appoint at least these three major officer roles as the inception of an LLC once formed.

You can always provide for specific methods too remove or replace an officer in the LLC operating agreement.  One person can hold multiple officer roles- this is typical in a small business or a single owner LLC.

You should NEVER sign a business document or other contract on behalf of your LLC as owner.  This is because when you are serving as the person running or managing the business, you are not doing so in your capacity as an owner of the business but rather in your capacity as a manager or officer of the LLC business.

This is an important concept to get if you care about preserving the limitation of liability protection offered by your limitation of liability company.  You never want to do anything that implies that you are doing business in your personal capacity.

One way to evidence that it is the LLC and not you personally that is entering into a legal contract is to make sure you always use a standard title when signing an agreement.  The ideal scenario is to have your LLC appoint officers like a President and you can sign agreements as the President of your LLC. For some very simple management structures, if there are no appointed officers and your LLC is member managed, you can sign as Managing Member or if your LLC is manager managed, Manager.

Your legal agreements are very important to your LLC business as they outline the business rights and obligations with other parties.  So make sure you take the time to read them properly and have them reviewed by your attorney to make sure you are not legally binding your company to something unintended or unreasonable.

This is a tricky question because there is always the interplay between the liability protection afforded to an LLC officer under the limited liability company laws and the general law that requires that you be personally accountable for your actions.

Making decisions in a business is difficult.  You need to decide on things when you may not have complete information and you may make decisions that may ultimately prove to not be the best one.  The law acknowledges this and so generally does not hold an officer or a manager personally liable for the acts made on behalf of the business AS LONG AS the person acted reasonably and did his homework when making such decisions.

This is a standard of care that is imposed on those who run a business which benefits others (like the other members) and the specific standard actually differs based on your state.  Some have a very low standard while others impose stricter requirements.  However, the general concept is that you should “mind the business” when serving in your officer role.

Gather all the available information you need in any business situation and take the time to review it.  Consult with your employees or advisers if need be. Spend the time to think through each business decision and always ask what is in the best interests of the LLC business.  If you maintain this standard and engage in some diligence, the LLC liability protection laws should protect you.

One additional protection you could ask for before serving in an officer role is an indemnity agreement where the LLC business will agree to cover your personal liability if one ever came up.  Another layer of protection is requiring a director and officer insurance policy to cover you.

Now, if you engage in unlawful or illegal conduct or you make decisions that are clearly in your interests but not the interests of the LLC business, you could be found personally liable.

Once an LLC is formed, the members of that limited liability company will need to select a management structure to govern the LLC.  There are two main structure: (i) member managed and (ii) manager managed.

In the great majority of states, the LLC is member managed by default.  This means that if you do not make a choice, the choice is made for you.  In some states, if you want your LLC to be manager managed, you will need to include certain required provisions in the formation documents you file with the state.  So, please look out for these requirements or make sure the lawyer or document filing service you use to form your LLC knows you want your LLC to be manager managed in this case.

So- which structure should you choose? 

If you look at most small business LLCs, you will see that they are member managed.  Member managed is the simplest structure and means that every member has authority to act on behalf of the business.  If all your members will have direct involvement in the management of the company, then a member managed LLC usually makes the most sense.    Internally, the members will agree on how they and when they will vote on certain LLC matters and agree with each other that they will each not act on behalf of the LLC until the proper votes are obtained.

A manager managed LLC is generally used when there are “passive” members in the LLC.  Passive means investors in the LLC who do not actively manage or otherwise operate the business of the limited liability company. If your limited liability company has passive investors, it is usually recommended you have a lawyer between the members and the managers.

With a manager managed LLC, the members, by virtue of being members, do not have authority to manage and operate the business of the limited liability company.  Instead, the members elect “managers” and it is the managers who have this authority.  It is important in a manager managed LLC that the LLC Operating Agreement have specific rules and processes for the managers to follow when managing the LLC.  They have duties to act in the best interests of the LLC.

Now, a manager can also be a member of the LLC.  If a manager is an adult (over 18) natural person, the LLC laws do not imposed any restrictions on who can serve as managers.  In some states, there may be restrictions on having a leval entity (such as another LLC or a corporation) be a manager.  

Once your limited liability company is formed and an LLC Operating Agreement is adopted that provides the LLC with members and a governance structure, then what is required for the LLC to start acting like a business?

GENERAL AUTHORIZATION

The limited liability company can only act through its members, managers and/or officers.  The LLC Operating Agreement should provide who has the authority to act on behalf of the limited liability company.  In the more simple member managed LLC structures, the members themselves have the authority to act on behalf of the LLC and are the agents of the LLC businesss when conducting business activity.

It is also common for a limited liability company to have operating officers such as a president, vice president, treasurer/CFO, and secretary.  Each of these officer positions are given authority with respect to its title.  An LLC can also hire employees and grant employees certain authority and responsibilities that can include acting on behalf of and binding the limited liability company.

SPECIAL ACTIONS USUALLY REQUIRE A MEMBER VOTE

It is not practical to require that every LLC action or decision be brought to the Members for an official vote of approval.  Accordingly, for day to day operational matters, the managing members, managers and/or officers make such decisions. 

However, it is often recommended that the agents of the LLC should not be able to make certain major decisions for an LLC without a proper and formal LLC member vote.  These decisions are generally listed out in the LLC Operating Agreement and subject to a specific rule that requires the approval of Members holding a certain percentage ownership of the limited liability company.

Common examples of such decisions include borrowing money, entering into transactions with a Member, selling all of substantially all of the assets of the LLC, entering into any major purchases of assets, and entering into a strategic transaction.

With some limited liability companies, only a majority vote will be required to approve while in others a higher vote or a unanimous vote is required. Each limited liability company has the flexibility to determine its own set of rules for how the LLC will operate in business, who can properly act on behalf of the limited liability company and when prior member or manager approvals are needed.