Chief executive officer is a title normally associated with incorporated businesses. Despite the prevalence of limited liability companies, many people tend to think in corporate-style terms. Because of the flexibility of the LLC form of business, those companies can create a CEO position (and any other desired officer positions).
The chief executive officer is the highest person of authority in the organization and is responsible for implementing strategic goals and overseeing operations. In a corporation (or an LLC that mimics a corporate structure with a board), a board of directors establishes strategic goals, and the CEO executes the strategy and reports to the board. In a company without a board, the roles of setting and carrying out strategy might both rest with the chief executive officer.
The reasons for appointing a CEO can relate to marketing as well as management of the business. In a standard LLC without a CEO, a manager or managing member would perform the same functions. A company may prefer using a corporate title to avoid any confusion among third parties about the role of the person with senior management authority.
LLC Management Structures
Limited liability companies fall into two basic management categories: member-managed and manager-managed. Member-managed LLCs reserve management powers to the members (owners). In a manager-managed LLC, authority to control the company is vested in a manager; the manager does not have to also be a member. Within the two general structures, the members can allocate duties and powers in any manner that suits their business. The members could equally share management powers, appoint a single manager with broad authority, or even replicate the corporate model with a slate of officers who report to a board.
Establishing a CEO
States allow companies the freedom to establish a CEO position. A company that wants to have a CEO or other corporate titles can create the offices by defining them in the operating agreement. An operating agreement is an agreement of the LLC’s owners regarding their respective rights and duties.