Designating Roles and Responsibilities of LLC Members
A Limited Liability Company or LLC is a legal business structure distinct from Sole Proprietorship, Partnership, and Corporation. It is an entity separate and distinct from its owner where debts and liabilities in relation to business operation are treated separately from those of its members.
Though it is like a corporation that has a limited liability, it is specifically designed for small businesses that is why it is easier to organize. It requires less formalities compared to corporation. Like a corporation which requires a certain number of stockholders or members to formally organize, a Limited Liability Company can be organized with a single member. LLC Members of a company are the owners of the company.
Who Can Join?
Anyone can be an LLC member including those with juridical personality like a corporation, or any business entities, organizations, and even other Limited Liability Companies. The information about the membership of the LLC is specified in the operating agreements.
How to Join?
Joining an LLC is simple. The current LLC members will unanimously vote for membership. Since ownership is a sensitive concern in any business entity, a unanimous vote is required, except when provided otherwise in the operating agreement.
If you have the leadership and the skills required to manage the operations of the company or if your professional skills will be a significant contribution in the operation or the administration of the business, you can become an active member. If you don’t have the time or the skills to run a business, you can invest cash or properties and become a passive member.
The Articles of Organization
The article, as it is referred to in the Tennessee Limited Liability Act, contains the basic information of the Limited Liability Company. During the organization of an LLC, this document must be created, agreed upon, and signed by the members. In relation to the members, it specifically identifies the LLC Members who will be personally liable for all of the liabilities of the LLC. It also contains information about whether the company will be member-managed, manager-managed, or director-managed. It may contain the names of the members and the name of those designated to managerial positions. It must be amended once there are changes in membership that affect the information stated thereon.
The Operating Agreement
An operating agreement is a written agreement among the members of the LLC. It specifies the roles of each member in managing, financing, and governing the business as a whole. It indicates the members’ interest in profits and loses. It contains the benefits as well as the rights and the responsibilities of every member in the company whether active or passive. It is important that you check this document from time to time.