Startomatic Blog

July 09, 2020 / by Andrew Fisher

The Humans of an LLC

Lots of people have heard of limited liability companies ("LLCs") - they seem kind of like a corporation's friendlier, more approachable little brother. And there are certainly things about LLCs that make them more attractive to many new small businesses - they have a ton of flexibility, they're pretty easy to set up, record keeping and meeting requirements are much less cumbersome than a corporation's, and they can offer some really nice tax benefits (more about that coming soon to this very blog).

Another reason many startup companies choose an LLC over a corporation is the less rigid management hierarchy of an LLC. While all corporations are required to have shareholders, directors, and officers, an LLC can exist with only members ("members" is what the owners of an LLC are called), although at Startomatic we recommend that LLCs designate Managers as well. Read on for all you need to know about members, Managers, and the other roles within an LLC.

(Side note: are you confused about choosing between an LLC and a corporation for your new company? Check out Startomatic's thorough-yet-practical advice, here.)

Organizer: An LLC’s organizer signs the company’s formation document (typically called Articles of Organization or Articles of Formation), files it with the state of formation, and then typically resigns. While their name is on the formation document for the life of the LLC, their role with the company (in the capacity of organizer) generally ends once the initial members (owners) of the LLC are named.

Member: Members are the owners of the LLC. In an LLC managed by Managers (which is the default for Startomatic LLCs), the members elect the Managers of the LLC. In an LLC without Managers, the members can manage the day-to-day operations of the company. Members can own different amounts and different types of equity, sometimes called “membership interests” or “units”, depending on the company’s Operating Agreement.

Manager: Some LLCs are managed by Managers. Managers function like a combination of directors and officers in a corporation, and typically make both the big-picture strategic decisions, as well as managing the day-to-day decisions of the company. Not all LLCs have Managers; some are managed directly by their members.

Registered Agent: An LLC’s registered agent is a person or company designated by the company to receive legal documents and notices from the Secretary of State of the state in which the LLC is formed, or other states in which the LLC is qualified to do business. Every state requires that an LLC specify a registered agent. An LLC will usually either designate a member or Manager as its Registered Agent, or hire a professional Registered Agent company to act in that capacity. Startomatic Launch includes the option to select a professional registered agent service at a cost of $99 per year.

If you start your LLC with Startomatic, there are two other Startomatic-specific roles you should know about:

Tax Contact: This is not a legally-created role, but a role specified by Startomatic to be responsible for one or more company tasks, depending on the company’s structure and tax choices. Here are the responsibilities of an LLC's Tax Contact:

(a) If the company is applying for an Employer Identification Number (EIN) from the IRS, it is required to designate a “Responsible Party” who the IRS can contact if it has questions about the EIN filing. The Responsible Party is also required to provide their Social Security Number and a contact phone number. 

(b) If the company is making an S-election with the IRS, the Tax Contact is the person the IRS will contact with questions about the election, and must provide a contact phone number.

(c) If the LLC has more than one member (owner), the Tax Contact is designated as the "Partnership Representative" in the company's Operating Agreement. This means they are the IRS's primary point of contact at the company, in the unlikely (and generally, unwelcome) event that the IRS needs to contact the company.

Legal Contact: Again, not a legally-created role, but a title specified by Startomatic if the company chooses to have Startomatic appoint a professional Registered Agent. In that case, the Legal Contact is the person to whom the Registered Agent forwards official communications. These communications may include state annual reports, state franchise tax information, and service of process (lawsuits and other legal filings relating to the company).

But what about corporations, you ask? Check out our blog post on the cast of characters in a corporation, here.

Startomatic is software designed to make it radically easier, faster, and less expensive to start and run a company. Startomatic Launch is a set of tools to help an entrepreneur build a business's identity, legally form the company, and get it online all within 48 hours.