There are different business entity types, each with its own benefits. A Limited Liability Company (LLC) is a popular choice for a small business entity because it offers several benefits to its owners. For starters, it provides some liability protection that is not available to sole proprietorships or general partnerships since an LLC is its own legal entity. Because the business is a separate legal entity, the LLC owner’s personal assets are separate from the business’s assets which protect the owners personally should the business be sued. An LLC also provides advantages for tax treatment and a more flexible business structure than corporations, making it a good option for many small business owners.
Knowing what to call an owner of an LLC isn’t always clear. Owners of sole proprietorships are called owners or sometimes principals. Partnerships have partners, and owners of a corporation are referred to as directors, officers, or shareholders.
So what is the owner of an LLC called?
Owners of an LLC are commonly referred to as members. If a manager is hired to run the LLC, that person is often called a member-manager. While not as common, corporate titles can be assigned to members, such as President, Founder, Chief Financial Officer (CFO), or Chief Executive Officer (CEO).
What are Titles for the Officers of an LLC?
While corporations are required to have at least one officer on the board of directors, LLCs do not typically have that requirement. However, members of an LLC can appoint both member and non-member officers if they choose to do so.
When assigning titles for non-member officers, make sure you consult state law first. There may be specific titles required in different states, and you want to meet the legal requirements of your state.
Typical officer titles include:
- Chairman (presides over meetings and manages business affairs)
- Treasurer (keeps track of the business’s debts and profits, manage the business bank account, and prepare the annual report)
- Vice-President (assists the President or acts on behalf of the President should they not be able to perform their duties)
- Secretary (handles all of the official records and organizes annual meetings)
An officer may have a specific role in the company, and it may be preferred to use their job title instead. If so, common titles could include Creative Director, Technical Director, Director of Operations, etc.
No matter what title you go with, make sure you spell out the titles and job descriptions for each of your LLC’s members and officers in the LLC operating agreement and other legal documents.
Who Can Be a Member of an LLC?
There aren’t many general restrictions on who can be an LLC member in the United States, but there may be special rules in your state. The primary restriction is the age of constraint for members of the LLC. In general, all LLC members must be at least 18 years old, however, an adult guardian can sign for a minor to make them a member. While this would allow a family member to be part of an LLC, a minor should never be an officer as minors can’t legally enter into contracts.
You can also assign a member who is an organization. Some businesses assign a separate LLC, S-Corp, or a corporation as a member. Additionally, an individual retirement account (IRA) could be an LLC member as well.
When you file your LLC Articles of Organization, you must name all of the LLC’s members and provide their contact information. If members are added after the initial formation, each state has a different process, such as showing the new members when the annual report is due.
Related: How do I add a member to my LLC?
Does the owner of an LLC refer to Member-Managed and Manager-Managed?
There are two main types of management of an LLC. One is called Member-Managed, and the other is known as Manager-Managed.
In a Member-Managed situation, the LLC members play an active role in the management of the business and act as decision-makers. If the business is a single-member LLC, this person typically plays the manager role. If there are several members, one, some, or all of them may act as managers.
Members don’t always want to be responsible for the day-to-day management. In this case, they may assign third-party managers, making the business a Manager-Managed LLC.
Members can assign managers and officers. Managers typically handle day-to-day operations. If a manager is also a member, they are called a Managing Member.
Something to note is that a single-member LLC can operate under the owner’s Social Security Number if there are no employees. If an additional member is added to a single-member LLC, an Employer Identification Number (EIN) will need to be applied for.