What is an LLC Managing Partner? (What You Should Know)
An LLC can be run by a manager and your LLC's operating agreement will define exactly what a managing partner can and cannot do.
With the collaboration of our LLC experts with over ten years of experience and some researchers, we have properly detailed everything about an LLC managing partner.
This comprehensive article covers everything from its definition to the functions the managing partner can perform.
Quick Summary
- An LLC managing partner is a person who has been given the mandate of managing the affairs of the business.
- Limited liability companies with more than one owner are eligible to hire an LLC managing partner.
- In 2021, as per IRS tax statistics, the U.S. saw an increase in partnerships, with over 4.4 million recorded, indicating the growing preference for such business structures.
- From my experience, a managing partner can control financial operations, including budgeting, tax affairs, accounting practices, and maintaining financial records.
What is an LLC Managing Partner?
An LLC managing partner is an individual, group of people, or legal entity that was authorized by the members to manage and run the affairs of the company.
A managing partner may or may not be a member of the entity.
Reflecting the increasing trend in business structures, in 2021, the United States, as per IRS statistics, observed a rise in partnerships to over 4.4 million, marking a 4.4% increase from the prior year, alongside a significant growth in partnership members, now exceeding 30.6 million, which is a 21% increase from 2020 [1].
Drawing from my experience, an LLC can hire more than a single LLC managing partner, depending on the complexity, size, and needs of the company.
Manager VS Member-Managed LLC
The managing member will depend on whether your LLC is member-managed or manager-managed.
If you are an LLC member of a multiple-owned LLC, then the individual who holds this position will be referred to as a "Managing Member."
Those who manage an LLC owned wholly by one person are called "Managing Partners."
Another way to determine if you have a manager or an operating member is by looking at what the operating agreement of your LLC states.
From my experience, a manager has a little more flexibility when it comes to tax management.
Managing Partner Management Duties
The management duties of the managing partner include all fundamental aspects of the limited liability company.
The responsibilities cover but are not limited to, the following areas:
- Policy Making: Set policies and procedures as well as implement the regulations for the LLC.
- Business Planning: Formulate objectives, strategies, and methods for the success of the business.
- Financial Management: Oversee financial affairs, budget, taxes, accounting, and records.
- Legal Issues: The company must ensure it follows federal and state laws and regulations.
- Managing Employees: Responsible for hiring, training, evaluating, firing, and paying employees.
- Business Relations: For our company, the manager directly deals with clients and other business entities on behalf of the LLC.
Managing Partner Authority
A managing partner has the authority to decide what LLC taxes are filed and if any estimated tax payments are due.
"The managing partner has the capacity to negotiate contracts and enter into debt arrangements impacting the company's revenues and operational funds. This bestows significant power on the managing partner compared to non-managing or silent partners, who are limited to participating in overarching discussions with other partners."
-Jon Morgan, Co-Founder & Chief Editor of Venture Smarter
For our LLC, the managing partner is authorized to act on behalf of the company for many different purposes, such as signing contracts, opening new LLC bank accounts, etc.
Also, if you are using an accountant or another financial expert, then your managing partner should know when and how to communicate with these people about the taxes on your LLC, as written on the IRS website [2].
Managing Partner Liability
The managing partner is the representative of the limited liability company and is involved in day-to-day business transactions.
Notably, according to the same IRS tax statistics mentioned above, over 95% of partnership returns were filed electronically in 2021, reflecting a trend towards digital compliance.
Since they have the authority to enter into contracts, sign documents, and conduct business on behalf of the company, they are more vulnerable to legal liabilities.
In some cases, managing partners may find themselves liable for tax debts if they have been negligent about filing taxes.
For our Texas LLC, the managing partner helps to streamline the company's corporate structure by filing necessary forms with the state to maintain limited liability status.
FAQs
Is the Managing Partner the Same as an Owner?
In most instances, the managing partners are part owners of the business. However, there are exceptions where some managing partners are not owners. It applies to both a manager-managed LLC and a member-managed LLC.
What Decision-Making Authority Does an LLC Managing Partner Have?
The decision-making authority of an LLC managing partner is typically defined in the operating agreement. While managing members often have broad decision-making powers, the specific extent of authority granted to a managing partner is outlined in the agreement established by the LLC.
Who Qualifies To Be an LLC Managing Partner?
Anyone appointed by LLC members can qualify to be a managing partner. It could be a member or an external individual with the responsibility to oversee daily operations.
References:
- /pub/irs-soi/soi-a-copa-id2305.pdf
- https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc
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