Owners of a limited liability company (LLC) are called members, and a multimember LLC by default is taxed as a partnership. The level of involvement in the company defines the type of member or partner each owner is.
Manager members are those partners who play an active role in running the company. If all members are active, the company is considered a “member managed” LLC, and each member has authority to act on the company’s behalf.
Partners who invest funds in an LLC but take no active role in the company’s operations are passive members. LLCs with passive members are considered “manager managed,” for the members elect or hire a manager to run the company for them. Passive members do not have authority to act for the business.
An LLC can have a mix of passive and manager members. In this instance, the members elects those fellow members they choose to run the company. Manager members may receive a greater share of the profits than passive members or they may be paid a salary if the LLC elects to be taxed as a corporation.