Manager-Managed LLC
Definition
A Manager-Managed LLC is a management structure where the owners (members) appoint one or more "managers" to run the day-to-day operations of the business. The members act as passive investors who provide capital and vote on major company decisions, while the managers make the operational decisions (like hiring employees or signing vendor contracts).
Why it matters
When you form an LLC, the state will usually ask on your Articles of Organization if it is "member-managed" or "manager-managed." If you have silent investors or owners who don't want to be involved in the daily work, you must choose "manager-managed" so you don't give them legal authority to bind the company to contracts. A manager can be one of the members, or it can be a non-member hired specifically for the job. You will also specify these management details in your operating agreement.
Example
Three friends invest $50,000 each to open a restaurant. Two of the friends have full-time jobs elsewhere and just want to be silent investors. The third friend has restaurant experience and will run the business full-time. They form a Manager-Managed LLC. All three are "members," but only the third friend is appointed as the "manager."