Under California’s new Revised Uniform Limited Liability Act, an LLC is formed when the California Secretary of State’s Office files the articles of organization.  Cal. Corp. Code § 17702.01(d).  Only five items of information are required to be disclosed in the articles.  Cal. Corp. Code § 17702.01(b)  These five items are included on the Secretary of State’s form of articles of organization, known as Form LLC-1.

One of these disclosures is whether one manager, more than one manager or the member(s) manage the LLC.  On the Form LLC-1, this is disclosed simply by checking the appropriate box.  One would expect  to be able to determine whether an LLC is manager-managed or member-managed simply by looking at which box is checked.  However, simply checking the box will not be sufficient to make an LLC  manager-managed.  Corporations Code Section 17704.07(a) provides that an LLC is a member-managed LLC unless the articles of organization and the operating agreement do either of the following:

  • Expressly provide that:
    • The LLC is or will be “manager-managed”;
    • The LLC is or will be “managed by managers”; or
    • Management of the LLC is or will be “vested in managers.”
  • Include words of similar import.

It was much simpler under the former Beverly-Killea Act because box on the Form LLC-1 alone determined whether the LLC was manager-managed or member-managed.