Membership in the LLC
A Tennessee LLC must have at least one member, who may be a natural person or a business entity. Members may acquire an interest in the LLC either in proportion to their contribution or in some other way that is in accordance with the LLC’s operating agreement or articles of organization.
The contributions of a member to the LLC may consist of cash, property, services rendered, or a binding obligation (such as a promissory note) to make these kinds of contributions in the future.
An LLC member may not resign except in accordance with the operating agreement or articles of organization, or his or her resignation is considered “wrongful.” If a member resigns or withdraws wrongfully, that member forfeits governance rights in the continued operation or the termination process of the LLC. The withdrawing member is only entitled to receive the lesser of the fair market value or the original contribution of the member’s interest—but if the LLC terminates, the member is entitled to receive his or her distribution. In either case, the member is entitled to his distribution or interest within six months of withdrawal, and the member is liable to the LLC and all its remaining members for any damages caused by the wrongful withdrawal.
Tennessee has an unusual statutory structure and naming convention for LLC management. As in other states, Tennessee state law allows for management of the LLC by all members. However, member-managed (and other) LLCs are expected to fill at least two “manager”: positions (which must be held by two separate individuals): a chief manager and a secretary. In reality, these are officer—not manager—positions.
The chief manager functions as LLC president and is responsible for insuring that management orders are executed—a common CEO day-to-day responsibility. The secretary is charged with maintaining the records of the LLC—again, a typical officer job.
The person(s) who can be chosen instead of the members to manage the LLC are not called managers, but “governors,” who are selected to serve on the board of governors.
Most smaller LLCs opt for member management.