Companies legally incorporated as entities are required, under national law, to have a board of directors. This applies to all 50 states. The company`s shareholders must elect members of the board of directors. All companies are legally treated as “persons” in accordance with the contract that creates them, whether they are companies or LLCs. An LLC`s enterprise agreement has the flexibility to enable a variety of management structures and systems. The members of the LLC can therefore be structured as a company and appoint a board of directors. States recommend that LCs develop enterprise agreements to establish relations between members. This is not required by law, but such an agreement clearly defines the obligations and responsibilities of each member, how management operations should be conducted and by whom. It aims to prevent future conflicts and problems between partners. If LLC has only one member, the enterprise agreement is not necessary. On the other hand, the “board” of an LLC is a creature of the contract.

Since the LLC is foreign to the actions of almost all states, the Board of Directors will have a structure, authority and limitations as defined in the corresponding enterprise agreement. This paradigm raises a lot of interesting questions. Thus, the board of directors is not designed in corporate law as a representative or other representative of the shareholders. Conversely, when members of an LLC create a board of directors and give it special authority, at least on an interse base, the power collectively delegated by the members and can be considered collectively as their agent. The question arises as to whether the board then acts jointly as an agent of the members or whether the board is the representative responsible for the LLC acting as the adjudicator`s power vis-à-vis third parties. The effects of this paradigm shift must be taken into account when developing a business agreement using a board structure. Another outstanding issue is the ability of a board member to vote by proxy. Many enterprise agreements give members and managers explicit power to vote by proxy, and some LLC statutes offer a standard rule allowing proxy voting (cf.B.

LED. CODE ANN. tit 6, 407). Conversely, except in Louisiana, directors cannot vote by proxy (see z.B. ABA CORPORATE DIRECTOR`S GUIDEBOOK 8 (2011); MBCA No. 8.20, comment). Do board members of a particular LLC have the right to vote by proxy? A well-written enterprise agreement must address this issue. In the absence of this, there will be ambiguities, because the available analogies provide contradictory, if not totally opposite, answers.

As mentioned above, board-managed LLC is foreign to almost all LLC deeds; There are, however, three exceptions. The LLC files in Minnesota, North Dakota and Tennessee each provide a legislated board-run structure that can be elected (see MINN). STAT. 322C.0407 (4) (2016); CENT N.D. code 10-32.1-39 (4) (2016); Tennessee. CODE ANN. No. 48-249-401 (c) (2015)). If a particular company wishes to have a structure managed by the board of directors, the organization can be an effective way to achieve this result in one of these acts. Subject to changes to a given enterprise agreement, the legal provisions relating to the structure managed by the Board of Directors should reduce the transaction costs incurred in the development of a corporate agreement for an LLC managed by a board of directors in another state. In some states, a limited liability company or LLC may have a board of directors if its owners (also called members) are structured in this way.