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

One of the perceived benefits of the LLC form is the flexibility that exist with respect to inter se management structure. Although many statutes provide skeletal defaults for when the LLC elects to be either “member-managed” or “manager-managed,” these are only default rules that may, in any particular LLC, be modified in the manner the participants desire. One not uncommon modification is structuring an LLC that is managed by a “board.” Given that the structures are, with the exception of LLCs organizing in the three states discussed below, free-form, the clarity or ambiguity of the structure is dependent upon the precision of the drafting employed in the operative agreement. We have found that there often is a great deal of ambiguity in these provisions. In addition, a number of decisions, Obeid v. Hogan and Richardson v. Kellar the most prominent, counsel caution against using a board because doing so may unintentionally incorporate (pun intended) additional law.