It's a Bird, It's a Plane, No, It's a Board-Managed LLC!

6 Pages Posted: 25 Mar 2017 Last revised: 24 Aug 2017

See all articles by Bradley T. Borden

Bradley T. Borden

Brooklyn Law School

Christine Hurt

Brigham Young University - J. Reuben Clark Law School

Thomas E. Rutledge

Stoll Keenon Ogden PLLC

Date Written: March 24, 2017

Abstract

The familiarity with corporate boards may prompt some business owners and their advisors to consider creating board-managed LLCs. Business owners who adopt such structures may be sorry for doing so for a number of reasons. Generally speaking, such structures are too complicated for closely held LLCs, which would benefit from simpler member-managed or manager-managed structures. Because LLC statutes generally do not provide for board-managed LLCs, boards of LLCs generally are the product of management provisions in LLC operating agreements. The lack of a statutory framework provides flexibility but also creates more room for adopting unwanted agreements. Terms such as “board of managers” and “board of directors” could, for instance, have different meanings, and could either grant authority to the board as a whole or to members of the board as managers. Finally, recent case law also indicates that courts will use corporate law to decide disputes that arise among members and managers of board-managed LLCs, corporifying the management structure of those LLCs. Thus, business owners and their advisors must use caution when considering whether to create board-managed LLCs. If they decide that such structures are a must, perhaps they will benefit from forming the LLC in one of three states that have statutory board structures. This brief article introduces these matters.

Keywords: LLC, limited liability company, board-managed LLC, member-managed LLC, manager-managed LLC, corporification

Suggested Citation

Borden, Bradley T. and Hurt, Christine and Rutledge, Thomas E., It's a Bird, It's a Plane, No, It's a Board-Managed LLC! (March 24, 2017). Bus. L. Today, No. 7, (Mar. 2017); Brooklyn Law School, Legal Studies Paper No. 488 ; BYU Law Research Paper No. 17-22. Available at SSRN: https://ssrn.com/abstract=2940437

Bradley T. Borden (Contact Author)

Brooklyn Law School ( email )

250 Joralemon Street
Brooklyn, NY 11201
United States

HOME PAGE: http://www.brooklaw.edu

Christine Hurt

Brigham Young University - J. Reuben Clark Law School ( email )

430 JRCB
Brigham Young University
Provo, UT 84602
United States
80144225354 (Phone)

Thomas E. Rutledge

Stoll Keenon Ogden PLLC ( email )

2000 PNC Plaza
500 West Jefferson Street
Louisville, KY 40202-2828
United States

HOME PAGE: http://skofirm.com

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