A Board of Directors for your LLC

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1. Feature: A Board of Directors for your LLC (4 min)

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LLC governance and law start with a simple idea: the owners primarily decide who makes decisions, and the operating agreement is where that choice is written down.

Most states begin with member management as the default. The agreement, or sometimes the formation document, can shift decision power to managers or another group. In Delaware, members manage the company unless the LLC operating agreement says otherwise. Florida and Wyoming follow a similar pattern and accept “words of similar import,” which just means you can use different terms as long as your meaning is clear.

That is where “boards” come into play.

Many LLCs use the phrase board of directors because it feels familiar to owners, investors, and business partners. The real question is not whether you can call it a board, but whether your agreement clearly says who can make what decisions and where the limits are.

If that’s done right, you can stay member-managed, name managers, or create a board-like group that works much like a corporate board.

When a Board Helps a One-Owner LLC

A single owner can run a business for years without a board of directors.

A board can create structure without changing ownership. It sets a regular schedule for reviewing budgets and strategy, requires reports, and makes decisions official instead of casual. If you want family involved or a steady mentor relationship, a board can be helpful.

The easiest way to start is small. Create a simple board and let it approve or veto a few big actions that are easy to define, such as taking on large loans, signing a long-term lease, or making deals with related parties. Keep all other authority with the owner. If it works, expand later to a more typical board instead of aiming for a perfect setup on day one.

This slow build works well if ownership will someday be shared through employee ownership or equity grants, because the company builds decision habits before control is shared.

Why Multi-Owner LLCs Use Boards

In multi-owner LLCs, boards mainly bring clarity. As more people share ownership, everyone still wants control over major issues but needs faster decisions for day-to-day operations.

A board can create that middle layer. It takes care of repeat decisions like budgeting, hiring, or expanding, following authority limits set in writing. If you want outside input, your agreement can include independent board members and give them the access they need to do the job.

Investors often want a structure like this. Some require a seat on the board. Others just expect a system they recognize. Either way, it makes accountability visible, and clear responsibility usually improves follow-through.

The Division That Matters: Owners and Board

A board plan works or fails based on one thing: whether everyone knows who has the final say.

Owners usually keep major decisions for themselves. The board handles some operational oversight and strategy within spending limits that adjust as the business grows.

A common setup is:

• The board can approve normal contracts, borrowing, and capital spending up to set limits.

• Anything above those limits requires owner approval.

Also define what happens when directors wear more than one hat. Directors might also be owners, employees, lenders, or investors. Without clear conflict restrictions and voting rules, that overlap causes problems later. Keep meeting notes too. They show the board acted with the right authority and the right information.

Big Events Still Need Member Votes

Boards cannot replace legal requirements for final owner approval on major transactions. Mergers, conversions, dissolutions, or selling most of the company’s assets always need member sign-off under state law.

Five State Examples

• Delaware: Default is member management. The LLC operating agreement can give authority to a board, manager, or a committee. It allows flexible setups.

• Florida: Defaults to member management but accepts “words of similar import.” Define the board and its role in plain terms in your operating agreement.

• Nevada: Member-managed by default, but you can create a board if you clearly write how it will run the company.

• Wyoming: Similar to Florida, flexible if written clearly and consistent with state approval rules.

• Texas: Uses the term “governing authority.” If you use a board, define its role clearly and update state records when management changes.

How to Add a Board to Your LLC

Switching to a board-managed structure takes two steps. First, update the operating agreement so there’s no confusion about where management power sits. Second, add a section(s) describing how the board works.

That section should cover:

• Effective date and approval. When the change takes effect and which past actions are confirmed.

• Board makeup. How many people serve, who can serve, and whether independence is required.

• Appointment and removal. Who picks board members, how long they serve, and how vacancies are filled.

• Authority. What the board can decide without owner approval.

• Reserved matters. Which actions always need owner consent, like changing the agreement or major sales.

• Limits. Spending and borrowing caps and how they are measured.

• Meetings. Notice, quorum, voting, and use of written consents.

• Duties and protections. Standards of conduct, access to information, indemnification, and expense coverage.

That list is not window dressing. It is what makes a board workable.

Bottom Line

A board can speed decisions and improve accountability in an LLC, but only if the LLC operating agreement clearly defines its authority. Labels do not matter; clear language does.

Our best advice: if you are wanting a board for your LLC to adjust how decisions are made, bring in a good attorney early in your decision process.

Have an interesting business question and need a free bit of advice? Send your question to [email protected]. No confidential info, please!