This feature originally appeared in the February 24th edition of the Pittsburgh Business Times.
Q: I am considering forming a limited liability company but do not understand how the entity is governed. What are my options?
Advice: There is remarkable flexibility associated with the governance alternatives for limited liability companies. The decision as to which alternative you select primarily depends upon who you want to have in control of the company. A limited liability company can be “member-managed” or “manager-managed”.
The governance mechanisms of a limited liability company can be structured to provide a certain level of authority to a majority interest, but also require the unanimous consent of all members for more significant decisions. Similar limitations of authority can be imposed upon a manager. In forming the entity and deciding what governance structure will be followed, it is just as important to determine how an impasse will be resolved in the event of a deadlock (if the governance structure you select allows for the possibility of an impasse). Lastly, do not overlook what is required to change the governance structure at a later date.
If you have any questions related to limited liability company governance, do not hesitate to contact Bernstein-Burkley.