The Lost Distinction between Agency and Decisional Authority: Unfortunate Consequences of the Member-Managed versus Manager-Managed Distinction in the Limited Liability Company
![handle is hein.journals/kentlj93 and id is 747 raw text is: The Lost Distinction Between Agency and
Decisional Authority: Unfortunate
Consequences of the Member-Managed
versus Manager-Managed Distinction in the
Limited Liability Company
BY THOMAS E. RUTLEDGE*
I. INTRODUCTION
T he universe of limited liability companies (LLCs) is
bifurcated into two species: LLCs that are member-managed
and LLCs that are manager-managed. Under most statutory
formulations, in a member-managed LLC each member, by reason of
their member status, has statutory apparent agency authority to act on
behalf of the LLC.1 In contrast, in a manager-managed LLC only those
who are designated as managers have statutory apparent agency authority
to act on behalf of the LLC, and members, as members, do not have such
authority. Most statutes provide that either the member-managed or
manager-managed paradigm must be designated in the articles of
organization.
Furthermore, various LLC acts link the internal management
structure to the apparent agency structure. In a member-managed LLC
there is a default rule for internal management by the members, with the
members voting pro-rata, in proportion to capital, or by some other
method of determining relative voting authority. In contrast, in a
* Member, Ogden, Newell & Welch, PLLC (Louisville, Kentucky). The author
thanks Professor Daniel S. Kleinberger (William Mitchell College of Law) and Dean
Allen W. Vestal (University of Kentucky College of Law) for their comments on an
earlier draft of this article and their ongoing diplomatic reminders of some subtle points
of agency law, and to HIP and LCP for their support.
1 As used herein, apparent authority has the meaning ascribed in the RESTATEMENT
(SECOND) OF AGENCY, section 8 (1958) [hereinafter RESTATEMENT].](ViewImageLocal?handle=hein.journals/kentlj93&div=26&collection=&method=preview&ext=.png&size=3)
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