An LLC manager has authority to bind the company to a contract when they act within the powers granted by the state’s LLC statute and the operating agreement, or when the company’s own conduct has given a third party a reasonable basis to believe the manager is authorized. That is the short answer on LLC manager authority to bind the company. The longer answer depends on how the LLC is structured, what the operating agreement says, whether the deal is routine or extraordinary, and what the outside party knew at the time of the deal.
Member-Managed or Manager-Managed Changes the Default
The first thing to check is the LLC’s management structure. In most states, which follow the original Uniform Limited Liability Company Act, every member of a member-managed LLC is a statutory agent of the company for its business. A member’s signature on a vendor contract or offer letter binds the LLC. In a manager-managed LLC, only the designated managers hold that default agency power; a non-managing member acting alone generally cannot bind the company.
States that adopted the Revised Uniform Limited Liability Company Act take a different route. Under RULLCA § 301, no one is an agent of the LLC solely because they are a member, regardless of management structure.1Bureau of Indian Affairs. Uniform Limited Liability Company Act (2006) Authority in those states flows from the operating agreement and common-law agency rules instead of from title alone.
Either way, the operating agreement controls where it speaks. It can shrink a member’s default authority or expand a manager’s. If the agreement is silent, the state statute fills the gap.
What the Operating Agreement Actually Grants
Actual authority is the power the LLC itself hands to the manager, through the operating agreement, a written resolution, or a documented vote. It takes two forms.
Express actual authority is spelled out. The operating agreement may say the managing member can sign contracts up to a stated dollar amount, open bank accounts, or hire employees without further approval. A formal resolution can also grant express authority for a single transaction, like negotiating and executing a specific lease.
Implied actual authority fills the gaps. A manager put in charge of a retail location has implied authority to do what is reasonably necessary to run it: ordering inventory, scheduling repairs, hiring a cleaning service. Nobody has to list those tasks because they follow from the job itself.
The hard cases live between “reasonably necessary” and “overreach.” A manager who maintains a storefront probably has implied authority to replace a broken window. Signing a five-year equipment lease that reshapes the company’s cost structure is a different question. When a manager stretches past what the operating agreement allows, the LLC may still be stuck with the contract through apparent authority while retaining an internal claim against the manager.
The Ceiling: Extraordinary Transactions
Even broad authority runs out at the edge of ordinary business. RULLCA and most state LLC statutes require unanimous member consent for certain major actions, no matter what title the person signing holds. These extraordinary transactions typically include selling all or substantially all of the company’s assets, approving a merger or conversion, and any other act outside the usual course of business.1Bureau of Indian Affairs. Uniform Limited Liability Company Act (2006)
The line is not always sharp. A construction company manager signing a subcontractor agreement is clearly ordinary. The same manager committing the LLC to a joint venture in an unrelated industry is not. Courts look at what the company actually does and whether the transaction fits that pattern. A well-drafted operating agreement draws the line in advance by listing decisions that need a member vote, setting dollar thresholds, or both.
Apparent Authority: When the LLC Is Bound Anyway
Apparent authority is the doctrine that most often surprises LLC owners. Under the Restatement (Third) of Agency § 2.03, apparent authority exists when a third party reasonably believes the agent is authorized, and that belief traces back to something the principal did. The LLC creates the appearance; the outsider relies on it; the LLC is bound.
Picture a manager who has spent months negotiating with a supplier using company email, company letterhead, and the title “Director of Procurement.” That manager places a $15,000 order. The supplier has every reason to think the order is authorized. Even if the operating agreement caps the manager’s purchasing authority at $5,000, the LLC may be on the hook because the company’s own conduct made the supplier’s belief reasonable.
The scale of the transaction matters. Routine orders look authorized because they are the kind of thing managers routinely handle. A manager trying to sell the company’s headquarters looks very different, and no reasonable counterparty would assume one person can authorize a sale like that alone.
When a Third Party Has to Ask Questions
Apparent authority has limits. A third party who sees red flags cannot ignore them and then claim reliance. Common law imposes a duty of inquiry when the circumstances would make a reasonable person suspicious: a deal that offers no obvious benefit to the LLC, a visible conflict of interest on the agent’s part, or terms far outside market norms. A third party who fails to investigate after seeing those signals loses the protection of apparent authority and cannot hold the company liable for the unauthorized act.
Statements of Authority: Putting the Public on Notice
A Statement of Authority is a public filing an LLC can use to define exactly who can act for the company and what the limits are. Under RULLCA § 302, the LLC may file this document with the Secretary of State, naming specific individuals or positions and describing their power (or restrictions on it) to transfer real property or enter into other transactions.1Bureau of Indian Affairs. Uniform Limited Liability Company Act (2006)
The filing’s effect depends on the transaction type. For grants of authority outside the real property context, an effective statement is conclusive in favor of a person who gives value in reliance on it, unless that person knows the authority has been revoked or restricted. For real property transfers, the protection is stronger: a certified copy recorded in the local land records creates constructive notice of any limitation, meaning buyers and lenders are deemed to know about the restriction whether they looked or not.1Bureau of Indian Affairs. Uniform Limited Liability Company Act (2006) Title companies and lenders check for these filings before closing.
The Five-Year Expiration
Statements of authority do not last forever. Under the uniform act, an effective statement is canceled by operation of law five years after its effective date, or five years after its most recent amendment, unless the LLC cancels it sooner.1Bureau of Indian Affairs. Uniform Limited Liability Company Act (2006) A company relying on the statement for ongoing real estate work needs to track that date and refile. A statement of dissolution or termination also wipes out any existing statement of authority.
Fiduciary Limits on How Authority Can Be Used
Having the power to sign is not the same as being free to sign anything. Fiduciary duties constrain how managers use the authority they hold.
Duty of Loyalty
RULLCA § 409 imposes a duty of loyalty on managers that includes three core obligations: accounting to the LLC for any property, profit, or benefit derived from the company’s business or property; refraining from dealing with the company as, or on behalf of, a person with an adverse interest; and refraining from competing with the company before dissolution.1Bureau of Indian Affairs. Uniform Limited Liability Company Act (2006) A manager who diverts a company opportunity to a side business, or who negotiates both sides of a deal without disclosure, breaches this duty even if the operating agreement technically allowed the signature.
Duty of Care
The duty of care under the uniform act is a floor rather than a ceiling. Managers must avoid grossly negligent or reckless conduct, willful misconduct, and knowing violations of law.1Bureau of Indian Affairs. Uniform Limited Liability Company Act (2006) Ordinary mistakes do not create liability. The business judgment rule shields managers who make informed decisions in good faith with a reasonable belief that the decision serves the LLC. The challenger has to prove gross negligence, bad faith, or an undisclosed conflict. A manager who does the homework and acts honestly is generally protected even when a deal goes badly.
Operating agreements can adjust fiduciary standards, but the uniform act bars members from eliminating the duty of loyalty or the obligation of good faith and fair dealing outright. A well-drafted agreement specifies what disclosures a manager must make, which self-interested transactions are permitted, and what approval process applies when a conflict comes up.
What Happens When a Manager Acts Without Authority
When a manager signs a deal they had no power to sign, the consequences can land on the manager personally, on the LLC, or on both.
Under the Restatement (Third) of Agency § 6.10, a person who purports to act for a principal without the power to bind that principal gives an implied warranty of authority to the third party. If the deal falls apart because the authority was missing, the third party can sue the manager personally for damages caused by the breach of that warranty. Every signature carries an implicit representation that the signer has the power to make the deal, and a false representation leaves the signer on the hook. This personal exposure disappears only if the LLC ratifies the act, the manager disclaimed authority at the outset, or the third party already knew the manager lacked authority.
Internally, an LLC can usually deny indemnification to a manager who acted outside their authority for personal benefit. Operating agreements commonly spell out the conditions for indemnification, and courts enforce those terms as written. A manager who goes rogue risks a personal judgment to the third party and no backup from the company.
Ratification After the Fact
Ratification is the LLC’s choice to honor a deal that was unauthorized when made. Under the Restatement (Third) of Agency § 4.01, ratification treats a prior unauthorized act as if an authorized agent had done it from the start. It can be explicit, through a formal vote or written approval, or implicit, through conduct. The classic implicit case is accepting the benefits: if an employee without authority signs for a shipment and the company keeps and uses the goods, the LLC has ratified the purchase.
Ratification has to be informed. The LLC must know the material facts before its acceptance counts. A company that only discovers months later that an employee signed a service contract cannot be said to have ratified it during the period of ignorance. Ratification also has to cover the whole transaction; the LLC cannot keep the favorable terms and discard the rest. Once it happens, the contract binds retroactively, the third party gets the deal, and the agent’s warranty of authority is no longer breached.
Revoking Authority Without Leaving a Gap
Ending a manager’s actual authority is straightforward. A member vote, a provision in the operating agreement, or removal from the management role shuts off the internal grant of power. The harder issue is what the outside world still believes.
Under the Restatement (Third) of Agency § 3.11, terminating actual authority does not by itself end apparent authority. Apparent authority sticks around as long as a third party’s belief that the former manager still acts for the LLC remains reasonable. A vendor who dealt with that manager for years using company email and a company title has no way to know the authority was pulled last Tuesday. The LLC stays at risk until it actively dismantles the appearance.
That means direct notice to counterparties who regularly dealt with the former manager, revocation of access to company accounts and systems, retrieval of company materials like business cards and letterhead, and updates to the LLC’s public filings.
Amending or Canceling the Public Filing
If the LLC previously filed a Statement of Authority naming the manager, filing an amendment or cancellation with the Secretary of State is essential. Under RULLCA § 302, the amendment must identify the company, reference the original filing, and state the change or declare the prior statement canceled.1Bureau of Indian Affairs. Uniform Limited Liability Company Act (2006) For real property authority, the cancellation or restrictive amendment also has to be recorded in the local land records to bind later purchasers. Until both filings are made, the original grant may still protect a good-faith buyer. Treat the removal of a manager’s public authority with the same urgency as the removal of their internal authority. That is the only way to close the gap.