Composition of Members and Governors
So you have decided to form your company as a limited liability company, under Minnesota statute §322B.105. The next question might be, how do the members, governors, managers, and other agents of a limited liability company interact and fill their respective roles?
Members of an LLC are similar to shareholders of the corporation. Depending on the member control agreement of the LLC, members may be issued membership interests. Also similar to a corporation, all property of the LLC’s property of the LLC itself and is not property of its members the profits and losses of an LLC are distributed among the members in proportion to the value of the contributions of each member unless otherwise agreed in the LLCs articles of organization.
Under the LLC Act, membership interests are divided into either financial rights or governance rights. Governance rights are defined as all of the members rights as a member in the LLC other than financial rights and the right to assign financial rights, and would include the right to vote to elect/appoint governors and other matters that are not related to sharing in profits and losses and distributions. Minn. Stat. §320B.03(23). Financial rights are the rights to share and profits and losses and to share in distributions. Minn. Stat. §322B.03 (19). Financial rights are freely transferable however to transfer governance rights there must be unanimous consent of all the members.
Members are not required to manage the LLC however members approval is required for certain actions such as the sale of substantially all of the assets of the LLC any amendments to the articles of organization and dissolution, among other things.
Much like the director of a corporation the governor of an LLC manages the business and affairs of the LLC. Minn. Stat. §322B.606. The LLC Act states there can be more than one governor however there must be at least one. The members appointed the governors of an LLC and they are usually reappointed on a yearly basis. Governors can serve an indefinite term not to exceed five years unless there is an agreement otherwise.
Managers in an LLC or test with the duty of overseeing day-to-day operations of the LLC to carry out instructions of the board of governors. The LLC act requires “one or more natural persons exercising the functions of the offices, however designated, of chief manager and treasurer.” Minn. Stat. § 322B.676. The manager must fulfill his or her duty “in good faith, in a manner the officer reasonably believes to be in the best interests of the limited liability company, and with the care and ordinary prudent person in a like position would exercise under the circumstances.” Minn. Stat §322B.69.