Member-Managed vs. Manager-Managed LLCs And Why Manager-Managed LLCs Are Preferred in Asset Protection Planning – Asset Protection Council

When forming a Limited Liability Company (LLC), one of the first and most important decisions is how the company will be managed. The two options are member-managed and manager-managed, and while the distinction might seem like a mere formality, it can have significant implications for control, liability, and asset protection strategy.

Understanding the Two Management Structures

Member-Managed LLC

In a member-managed LLC, all members (owners) are directly involved in the daily management and decision-making of the business. This is the default structure in most states if the operating agreement does not specify otherwise.

Authority: Each member can bind the LLC in contracts and other legal matters.
Visibility: Members are publicly associated with the LLC’s operations and decisions.
Liability Exposure: Because members are acting as agents of the company, their actions can more easily be attributed to the LLC.

This structure is simple and often sufficient for small, closely held operating businesses. But in asset protection planning, it creates challenges.

Manager-Managed LLC

In a manager-managed LLC, the members appoint one or more managers to run the day-to-day operations. The members themselves take a more passive, owner-level role unless they are also designated as managers.

Authority: Only designated managers can bind the LLC.
Separation of Roles: Members are legally distinct from the operational decision-makers.
Flexibility: The manager can be an individual or an entity, and members can remain passive.

This separation between ownership (members) and control (managers) is what makes manager-managed LLCs so valuable in asset protection structures.

Why We Prefer Manager-Managed LLCs in Asset Protection

1. Allows the Asset Management Limited Partnership (AMLP) to Be the Member

In our asset protection designs, we often structure ownership so that the AMLP is the sole member (owner) of the LLC, while the individual client serves as the manager.

This arrangement creates a clean legal separation:

The AMLP (which is typically owned mostly by a trust and minimally by the individual) owns the LLC membership interest.
The individual client is not the owner; they are simply the manager with authority to run the company on behalf of the AMLP.

This preserves ownership privacy and control separation—core pillars of asset protection planning. It also ensures the LLC itself is not personally owned by the individual, insulating it from personal liability risks.

2. Helps Ensure Liability Runs to the Individual Manager, Not the LLC

Another critical advantage: if the LLC is ever sued because of something done by the person running it, we want the liability to attach to that individual’s actions, not automatically to the LLC as the entity.

In a member-managed LLC, the member’s actions are legally the LLC’s actions — which can make it easier for claimants to go directly after the LLC and its assets.
In a manager-managed LLC, the individual acting is clearly doing so as a manager (an agent), not as an owner, which can help keep liability personal rather than entity-wide.

In other words, if there is risk of operational liability, it is often strategically safer to have the person exposed, not the holding LLC that owns valuable assets. The LLC can then be treated as a container for assets, while operational liability stays with the individual acting in their management role.

Bottom Line

Using a manager-managed LLC structure gives us the best of both worlds:

Ownership protection: The AMLP can be the member, shielding the ownership interest from personal creditors.
Operational control: The individual can still act as manager and run the company.
Liability isolation: Actions by the manager do not automatically expose the LLC’s assets to liability.

This deliberate separation between who owns the LLC and who manages it is a cornerstone of effective asset protection planning.

Lodmell & Lodmell, PC is one of the nations leading Asset Protection Law Firms and the creators of The Bridge Trust®. L&L serves clients nationwide and may be reached at support@lodmell.com or 602-230-2014.