25th April 2023

How To Manage An LLC

A limited liability company (LLC) is a private entity that protects its owners' assets from financial liabilities such as debts and lawsuits. Establishing an LLC isn't so complex. However, the task doesn't end there. Managing it effectively leads to the desired success.

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How To Manage An LLC

A limited liability company (LLC) is a private entity that protects its owners’ assets from financial liabilities such as debts and lawsuits. Establishing an LLC isn’t so complex. However, the task doesn’t end there. Managing it effectively leads to the desired success. Read on below to learn the tips you can use and implement to manage an LLC.

LLC Management Methods

When establishing an LLC company, you should also decide who manages it. Most states prefer that you provide a basic idea of how and who will manage the business in the articles of organization. There are two types of LLC management that you can choose from:

  • Member-managed: A member-managed LLC has all its members deciding and managing the business operations. The drawback of this system is that you can’t prevent a member from being involved unless with a valid reason. The only way to do this is by minimizing the member’s power in the operating agreement.
  • Manager-managed: A manager-managed LLC involves hiring one or more separate managers to handle the business’s daily operations. It’s more advantageous than the member-managed method since it provides flexibility, whether hiring a professional manager from within or outside the company. There’s also a reduced workload as the members can focus on business strategies and activities and leave the managerial roles to others.

Whether the members or the manager manages the LLC, they should run it per the company’s core values and goals. Therefore, all the LLC staff should trust the individuals managing the company.

Tips On Managing An LLC Effectively

Every company, regardless of size, needs proper management of money, time, technology, staff, and other business resources. Failure to implement best management practices may lead to poor performance and the company’s eventual downfall. Below are some management tips you’d want to consider for your LLC:

1. Separate The Personal And Business Assets

Some business owners may prefer to create a sole-member LLC to acquire a new employer identification number (EIN). That way, you can separate the personal and business credit lines. If you’re a non-US resident looking to start a business, you can open a non US resident LLC bank account to protect your assets from business assets.

If you don’t do so, your LLC may face legal risks despite its liability protection advantage. But still, some courts and creditors have managed to go around the LLC liability laws when members combine business and personal assets. So, separating the assets is a way to avoid unnecessary legal battles in case your company runs bankrupt or gets sued.

2. Get An Insurance Policy

Getting an insurance policy for your LLC protects your assets when the LLC laws don’t. For example, it’s applied when your member or business faces a lawsuit or injury. In this case, insurance will cover the damages and protect your assets.

Furthermore, insurance is an advantage when the court refuses your liability protection. It protects the business and assets from lawsuits, judgments, and reputation tarnishing. However, you should remember that commercial insurance doesn’t protect business and personal assets from unpaid debts, whether guaranteed personally or not.

3. Get LLC Managers

Hiring a professional manager for an LLC business elevates its management as they oversee the business’s operations on behalf of the members. Remember to choose someone with the necessary expertise in your business niche.

An excellent approach is to put the manager and the members at the same level instead of in a top-down fashion. A horizontal management structure allows the managers and members to work together toward reaching a common goal.

An alternative to hiring a professional manager is to have a member with more experience in LLC operations and management positioned as one.

4. Have An Operating Agreement

An operating agreement is a contract that outlines the business’s main management structure. You don’t need to file and register it with the authorities. Instead, the members can create a draft for the organization that outlines the members’ roles and duties.

The operating agreement should also outline the compensation plan so that the members know when and how to expect compensation, including dividends for the shares they hold in the business.

5. Establish A Solid Profit Allocation System

The allocation system in an LLC enables the members or managers to allocate the business profits in a specific manner. Initially known as guaranteed payments, it involves the proportion of profits according to each member’s shares. The members are, therefore, allowed to write checks when they need money whenever the LLC has it readily available.

It also enables them to create a direct ownership relationship to avoid confusion when managing the business. They also have the upper hand since the members can maintain records of profits earned on profit returns and analyze the losses in the process.

6. Get An Employer Identification Number

An employer identification number is essential when starting and managing an LLC. It helps you separate the business entity and assets from yours. The Internal Revenue Service (IRS) also uses it to label and tax your LLC business.

An EIN is required if your LLC has more than one member, when opening the business’s bank account, and when you’re looking to hire new employees. You can get one for free from the IRS website.


Proper management of an LLC enables the business to grow and make the desired profits. If you have the time and expertise to manage your business, go for it. Or you can ask any other member to help manage the company. However, if all members are incapable of running the LLC, you can hire a manager to oversee it. Make sure you hire highly competent personnel for effective management.

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