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Limited Liability Company Management Basics

North Dakota Limited Liability Company Management Basics

/ Business Law

One of the strengths of a limited liability company is its flexibility. One way it is more flexible than alternatives like corporations, limited partnerships, and limited liability partnerships is in its management.

The North Dakota Uniform Limited Liability Company Act allows members to have the option to choose one of three different ways to manage the LLC: (1) member-managed; (2) board-managed; and (3) manager-managed.

Member-Managed

Management by members is the default option for limited liability companies. Each member (a member is an owner) has an equal say in management. Member-managed LLCs resemble how partnerships are managed. With member-managed LLCs, each member owes fiduciary duties to the other members.

Board-Managed

Management by a board of governors resembles how corporations are managed. The members elect the board of governors, and the board of governors appoint the president, secretary, and treasurer. The members generally do not retain management rights beyond their ability to elect the governors. Governors owe fiduciary duties to the members, but members’ fiduciary duties to one another are relaxed.

Manager-Managed

Management by manager is where the members choose a single person or entity to manage the limited liability company. The members generally retain no power to make decisions and no board is formed. Instead the manager has all decision-making authority. The manager owes fiduciary duties to its members, and the members’ fiduciary duties to one another are relaxed.

Choosing the right management structure requires professional assistance. As shown above, different management structures carry different legal duties. Each member, governor, or manager must understand these legal duties. Give us a call at 701-297-2890 or send us an email if you have any questions about limited liability company management.

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