![]() This could include having a new election every year, or making removal easier (by less than a majority, and not for cause), and replacement easier (by a simple majority of the membership interests). If I am representing an investor, I want to make sure the manager can be removed if she is not doing the best job for the company. In that case, the operating agreement will provide that the manager may only be removed for cause, and such removal requires a vote of a supermajority of the members which supermajority will include the manager’s percentage interest as a member. If I am representing the manager, I will want to make sure that she cannot easily be removed. How the operating agreement is drafted for these situations varies greatly based on who is doing the drafting. However, if the manager is an individual, the LLC operating agreement should consider what happens when the manager resigns, is unable to serve due to a disability or other circumstances, dies, should be removed for cause, or when the members simply want someone else to act as manager. ![]() This vote is usually a supermajority vote, but the percentage will depend on what percent of the company the sponsor insiders own. If this is the case, election and removal provisions are simple – the manager is stated in the operating agreement and stays as the manager unless a successor is elected by a vote of the members. This is often the structure in real estate development and investment groups where the manager is an entity controlled by the sponsor. In some LLCs, the manager is another business entity rather than a person, usually either another LLC or a corporation. Once you have decided that your LLC will be manager managed, you should carefully think through the methodologies you want to put in place to elect and remove a manager. In a previous blog I discussed the important decision of determining whether you will have a manager managed or a member managed LLC. I cannot overemphasize the importance of having operating agreement provisions in place to remove and replace a bad Manager. ![]() Some of those have had to remove their LLC manager for one reason or another. Beware of LLC Managers that can’t be removed! As a business attorney, I work with many LLCs in San Jose and the Bay Area.
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