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Govern your LLC with a manager-managed operating agreement. Required by most banks to establish accounts, this document specifies how designated managers will run operations while members remain investors. Select your state for legally compliant operating agreement templates.
A Manager-Managed LLC Operating Agreement is the internal governance document that defines how designated managers run your LLC's daily operations while members remain passive investors. Unlike articles of organization (which are filed with the state), the operating agreement is a private contract among members that establishes management authority, decision-making procedures, and fiduciary duties.
This agreement is essential for LLCs with outside investors, complex operations, or professional managers who may not be owners. It clearly separates management authority from ownership rights, specifying which decisions managers can make independently and which require member approval. Most banks, lenders, and business partners require a written operating agreement before doing business with your LLC.
A well-drafted manager-managed operating agreement protects both managers and members by documenting management scope, compensation, liability limitations, and removal procedures. It prevents disputes by establishing clear rules for profit distribution, capital calls, adding new members, and transferring ownership interests.
A manager-managed LLC Operating Agreement is an internal contract among the LLC's members that establishes a management structure in which one or more designated managers run the day-to-day operations of the business. The managers may be members or non-members. This agreement defines the powers and duties of the managers, the rights of the members as primarily passive investors, ownership percentages, capital contributions, profit distributions, voting rights on major decisions, and procedures for adding or removing members and managers. It is generally not filed with the state; instead, it is signed by the members and kept with the LLC's records.
A manager-managed structure is often chosen when: some or most owners want to be passive investors and not involved in daily operations; the LLC has many members and centralized management is more efficient; the business needs professional managers who may not be owners; or certain investors (such as venture capital or private investors) require separation between management and ownership. If all owners will actively participate in running the business, a member-managed Operating Agreement will usually be more appropriate.
Under a manager-managed LLC structure, the members appoint one or more managers, who may be individuals or entities and may or may not be members of the LLC. The Operating Agreement defines: the scope of the managers' authority over day-to-day operations; which actions managers can take without member approval (such as routine business decisions); and which major actions require member consent (such as admitting new members, selling substantial assets, or dissolving the LLC). This form allows you to clearly set out the managers' duties and limitations.
Your LLC's Articles of Organization (or equivalent state formation document) usually indicate whether the LLC is member-managed or manager-managed. This manager-managed Operating Agreement is generally appropriate if: your filed Articles of Organization identify the LLC as manager-managed, or you intend to amend your Articles to change from member-managed to manager-managed. It is important that your Operating Agreement and Articles of Organization be consistent regarding management structure.
In most states, the Operating Agreement—whether member-managed or manager-managed—is an internal governance document, not a public filing. You typically: file the Articles of Organization (or similar document) with the state to form the LLC and to indicate that it is manager-managed; and keep the signed Operating Agreement in your LLC's records and provide copies to members, managers, and relevant advisors. A small number of states (such as New York, California, and Maine) may impose additional requirements for LLC governance or related filings.
Yes, many LLCs start as member-managed and later convert to a manager-managed structure as the business grows or new investors join. Typically, this involves: amending your Articles of Organization (or equivalent) with the state to reflect the new manager-managed structure, if required by your state; adopting a manager-managed Operating Agreement (such as this form), or amending your existing Operating Agreement to replace member management with manager management; and having all members sign the new or amended agreement and updating your LLC records. Because state procedures vary, you should confirm your state's specific requirements.