Pursuant to Hawaii Revised Statues Sections 428-301 and 428-404, a Hawaii limited liability company (LLC) can be managed by either (1) the members of the Hawaii limited liability company or (2) designated managers. The former is known as a member-managed Hawaii limited liability company and the latter is known as a manager-managed Hawaii limited liability company.
Member-Managed LLC
In a member-managed Hawaii limited liability company, each member has equal rights in the management and conduct of the company’s business. Each member is an agent of the Hawaii limited liability company for the purpose of its business. Therefore, an act of a member, including the signing of an instrument in the company’s name, for apparently carrying on in the ordinary course the company’s business binds the company.
However, such act will not bind the company if the member had no authority to act for the company in the particular matter and the person with whom the member was dealing knew or had notice that the member lacked authority. Furthermore, an act of a member which is not apparently for carrying on in the ordinary course of the company’s business binds the company only if the act was authorized by the other members.
Manager-Managed LLC
In a manager-managed Hawaii limited liability company, the manager or managers have the exclusive authority to manage and conduct the company’s business. The managers of a manager-managed Hawaii limited liability company may, but are not required to be members.
Each manager is an agent of the company for the purpose of its business. Therefore, an act of a manager, including the signing of an instrument in the company’s name, for apparently carrying on in the ordinary course the company’s business binds the company.
However, such act will not bind the company if the manager had no authority to act for the company in the particular matter and the person with whom the manager was dealing knew or had notice that the manager lacked authority.
Furthermore, an act of a manager which is not apparently for carrying on in the ordinary course of the company’s business or business of the kind carried on by the company binds the company only if the act was authorized by a majority of the members.
In summary, if there will be numerous members in your Hawaii limited liability company and you feel uncomfortable with any member being able to bind the entire limited liability company, you should form a manager-managed Hawaii limited liability company.
That way at least some control exists over who has the authority to sign contracts. In addition, if you do not want to be publicly listed as a member you should form a manager-managed Hawaii limited liability company because only the managers will be listed in the public records.
As you can see there are many issues to consider when forming a Hawaii limited liability company and having a Hawaii lawyer is beneficial.
Therefore, please contact us to get guidance from a Hawaii attorney who intimately knows the LLC formation process and the pitfalls that can be avoided.
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