Wednesday, September 14, 2011
The Positive Law Election to be Member- or Manager-Managed
The Positive Law Election to be Member-Managed or Manager-Managed
Whether a LLC is “member-managed” or “manager-managed” is determined exclusively by reference to the option elected in the Articles of Organization – every Kentucky LLC must state that it is one or the other. See KRS § 275.025(1)(d). As such, the determination of whether the LLC is one or the other is not made by a substantive review of the inter-se management structure defined in the operating agreement. Rather, “Irrespective of the provisions of the operating agreement, whether a LLC is ‘manager-managed,’ as that phrase is used in the Act, depends on whether the articles of organization so provide.” Prototype LLC Act § 401, comment. As the Articles of Organization require a declaration of whether the LLC will be managed by managers or by the members, and the terms and provisions of the Articles of Organization are of public record, all parties dealing with the LLC may ascertain and are deemed to have notice of the election made by the LLC. KRS § 275.025(7)(b). See also Thomas E. Rutledge, The 2007 Amendments to Kentucky Business Entity Statutes, 97 Ky. L.J. 229 at 244 (2008-09).