Member vs Manager LLC

A US LLC is owned by "members" and operated by "managers." These are not the same thing. Understanding who owns versus who controls your LLC is critical for non-US founders setting up a US business, especially when combining it with an ITIN, EIN, and US business bank account.

Member vs Manager LLC: The Core Difference

In a US LLC, a member is an owner. A manager is whoever runs the business day-to-day. In many cases, especially for solopreneurs, you are both.

Member (Owner)

Members own the LLC and hold membership interests. They receive distributions of profit. For US tax purposes, if you are the sole foreign member of a single-member LLC (the most common structure for non-US founders), your LLC is treated as a "disregarded entity." This means the IRS ignores the LLC and taxes you directly on the business income using your ITIN or EIN.

Manager (Operator)

Managers handle decisions, sign contracts, manage bank accounts, and run operations. In a member-managed LLC, members also serve as managers. In a manager-managed LLC, a separate person (or entity) serves as manager while members sit back.

Why Non-US Founders Care

When you file your EIN application (Form SS-4 via fax), you declare whether your LLC is member-managed or manager-managed. When your foreign-owned LLC reaches complexity, you will file Form 5472 (Information Return of US Persons with Respect to Certain Foreign Corporations) to disclose foreign ownership, and you may file a pro-forma Form 1120 (US Corporation Income Tax Return) even at zero income. Founders Credit handles the LLC setup, EIN filing, and these compliance requirements done-for-you.

Quick Example

You are a German founder. You form a Delaware LLC as the sole owner (member). You manage it yourself (manager). Your LLC is member-managed. You apply for an EIN using your ITIN. The IRS treats your LLC as a disregarded entity; all profits flow to you personally on your tax return. Simple, clean, and common.

If later you hire a US operations manager and want them to sign contracts and run day-to-day tasks while you focus on strategy, you could convert to manager-managed. The structure remains the same; the roles just shift.

Practical Setup for US Bank Accounts and Credit

Whether member-managed or manager-managed, you will need your EIN and likely your ITIN to open a US business bank account. Banks like Mercury, Wise, and Relay accept non-US founders remotely and do not require an SSN if you have an ITIN and EIN. Your LLC documents (articles of organization and an operating agreement showing whether it is member-managed or manager-managed) will be part of the application package.

Once you have an EIN and a US business bank account, building US business credit becomes possible. This is where the member/manager distinction matters less in practice; what matters is that your LLC is properly documented and that you file the correct annual forms (especially Form 5472 if you are a foreign member).

Glossary

• Member: Owner of an LLC who holds a membership interest and is entitled to distributions.
• Manager: Person or entity designated to operate the LLC and make binding decisions.
• Member-managed: LLC in which members also act as managers; common for solo founders.
• Manager-managed: LLC in which a third party or external entity operates the business while members are passive.
• Disregarded entity: Single-member LLC treated as a sole proprietorship for US federal tax purposes.
• Form 5472: Information return filed by foreign members of US LLCs to report ownership and transactions.
• EIN: Employer Identification Number required to open a US business bank account and file tax forms.
• ITIN: Individual Taxpayer Identification Number issued to non-US persons for US tax filing; does not require a visa.

Frequently asked questions