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Manager-Managed vs. Member-Managed LLCs in Arizona

by | Jan 13, 2025 | Arizona Business Law

Choosing the right management structure for your LLC is a critical decision that impacts how your business operates. In Arizona, LLCs can be either manager-managed or member-managed. Understanding the differences will help you determine which structure best suits your needs.

Member-Managed LLCs

In a member-managed LLC, all members (owners) share equal authority to manage and run the business. This structure is common for small businesses or companies where the owners want direct involvement in daily operations.

The primary benefit of structuring management this way is having a simple structure with equal say among members. There is no need to hire or designate a manager in this case. Decision making is usually very transparent among members.

However, this can lead to conflicts if members have differing visions or priorities. This is usually less ideal for businesses requiring professional management.

When to Choose Member-Managed: This option works well for businesses with a small number of members who are actively involved and have aligned goals.

Manager-Managed LLCs

In a manager-managed LLC, the members appoint one or more managers to oversee the business. The manager can be a member, a non-member, or a professional hired specifically for this role. 

This structure allows for flexibility in management. It allows members to take a passive role, focusing on investments or other priorities. Professional management can bring expertise and efficiency to the business. It’s usually suited for larger LLCs or those with numerous members, but it can still be effective for smaller LLCs in certain scenarios.

With a manager structure, members have less direct control over day-to-day operations. Don’t forget the additional costs of hiring a manager if you are not going to be the manager yourself.

When to Choose Manager-Managed: This structure is ideal for businesses with many members, passive investors, or owners who prefer to delegate operational responsibilities. This structure can also be used when trusts are involved in LLCs as members.

Other Key Considerations:

  • Operating Agreement: Regardless of the structure, your LLC’s operating agreement should clearly outline roles, responsibilities, and decision-making processes.
  • Filing Requirements: Arizona requires you to specify whether your LLC is manager-managed or member-managed when filing your Articles of Organization. Be sure to include all applicable attachments as well to avoid delays or denials during processing.
  • Long-Term Goals: Consider your business’s growth and complexity. What works for a startup might not suit a larger enterprise.

Whether you’re starting an LLC or evaluating your current structure, understanding the differences between manager-managed and member-managed LLCs is essential. For expert guidance on setting up your LLC in Arizona, contact Windrose Law Center today for a free consultation.

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