This post was updated on January 18, 2021.
An Independent Manager is an ad hoc member of an LLC’s board of managers that has no equity relationship with the entity and thus is considered independent of the LLC’s ownership.
What Does an Independent Manager Do?
A Limited Liability Company (LLC) is managed by a board of managers. The board of managers oversees the activities of the LLC. An Independent Manager is a special type of manager appointed to the LLC’s board that has no equity relationship with the entity and thus is considered independent of the LLC’s ownership. The role of this unique position is usually outlined in the LLC’s operating agreement.
Why Would an LLC Appoint an Independent Manager?
Appointment of Independent Representation may be a lender or third party requirement in a transaction. This special position provides a level of security for the third party. (Think of it as insurance.) The third party will detail the Independent Manager’s duties in the operating agreement. These duties generally require the Independent Manager to be party to and vote in certain major board decisions. The specific types of decisions the Independent Manager must give consent for are also outlined in the operating agreement of the LLC. By requiring this unique position, the third party retains some control over the LLC without actively managing the entity.
As always, the contents of this article should not be considered legal or financial advice. Have more questions about independent managers? We’re here to help.