Great. Business is booming in New Orleans, you have decided to start a new business or convert an existing one and have determined that a Louisiana limited liability company (“LLC”) is the best entity formation for the business and its owner(s). But in the midst of drafting the Articles of Incorporation for your LLC, you wonder whether a member-managed or manager-managed method is the superior management form.
Under Louisiana law, a member-managed LLC is the default rule in which the LLC is managed by all of its members. If the Articles of Organization do not provide otherwise, this is the management form that will apply. Alternatively a manager-managed LLC is managed by a board of managers. Such board of managers would consist of persons elected by the members who may be, but do not have to be, members. Each member is an agent of the LLC matters in the ordinary course of business, except for dispositions (alienation, lease or encumbrance) of the LLC’s immovable property. Managers of an LLC have a fiduciary duty of care and loyalty to the LLC’s members.
The manager-managed LLC has a distinct advantage: a non-member can be a manager whereas a member-managed LLC may only be managed by members. This provides more flexibility in that a manager-managed LLC may have all members as managers or a mix of member and non-members without having to amend the Articles of Organization. Thus, it is preferable when drafting the Articles of Organization to designate the LLC as “manager-managed.”
If you are interested in starting a new business or converting an existing one, learn about your legal rights from an experienced New Orleans business attorney by filling out our free, no obligation case review form located on this website.