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Natori Law Office LLLC

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1003 Bishop St • Pauahi Tower • Suite 1360 • Honolulu, HI 96813
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  • Home
  • Our Attorneys
    • Nathan Natori
  • About Us
    • Your Initial Meeting
    • Clients
    • Testimonials
    • Fees
    • Outer Island
      • Big Island
      • Maui
      • Kauai
  • Practice Areas
    • Real Estate
      • Purchase & Sale of Hawaii Real Estate
      • Agreement of Sale
      • Commercial
      • Encroachment
      • Eviction
      • For Sale by Owner
      • Landlord / Tenant
      • Brokers & Realtors
      • Water Rights
      • Partition
    • Business
      • Forming A Business
      • Acquiring A Business
      • Corporate Governance
    • Financial Institutions
    • Construction
    • Debt Collection
    • Finance
    • Foreclosure
    • Franchise
    • Health Care
    • Land Use
    • Lobbying
    • Nonprofit
    • Public Utilities
    • Guardianship
    • Probate
  • News
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Hawaii LLC Formation: Manager-Managed Versus Member-Managed

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.

More Articles on Hawaii Corporate and Business Law
  • Duties Owed By a Hawaii Agent to its Principal
  • Hawaii LLC Formation: Manager-Managed Versus Member-Managed
  • How To Acquire An Existing Hawaii Business
  • Incorporating In Hawaii
  • Issues You Must Know About In Your Purchase or Sale of Medical & Dental Practices in Hawaii
  • Owner’s Liability for the Debts and Obligations of a Hawaii Limited Liability Company
  • Setting Up Your Hawaii Business Entity for the Small Business Administration’s 8(a) Business Development Program
  • Transacting Business in Hawaii and Licensing
  • What Happens When a Hawaii Corporation Has Been Administratively Dissolved?
  • Why Using the Hawaii Department of Commerce and Consumer Affairs Business Registration Division’s Limited Liability Company Articles of Organization (Form LLC-1) May be a Mistake
  • Why You Would Need an Operating Agreement for Your Hawaii LLC

 

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Aditya S.

Nathan is thorough, detailed, and knowledgeable.

Natori Law Office LLLC
1003 Bishop St
Pauahi Tower, Ste 1360
Honolulu, HI 96813

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The information and content on this website is not formal legal advice. It is for informational purposes only. There is no legal association with the Natori Law Office LLLC based upon your viewing this website. You do not have any attorney-client relationship with the Natori Law Office LLLC unless you have formally retained the Natori Law Office LLLC to represent you by signing its engagement letter and complying with its terms.