For many small business owners across Pennsylvania, forming a limited liability company (LLC) offers the perfect balance between flexibility, liability protection, and straightforward governance. But within that framework, one issue often generates confusion — how much power does a “manager” really have, and what limits apply to their authority under Pennsylvania law and the company’s operating agreement?

The answer depends on a mix of statutory rules and carefully drafted contractual provisions. Working with experienced Pennsylvania business law attorneys helps ensure your operating agreement clearly defines manager authority, prevents internal disputes, and supports sound decision-making in your company’s daily operations.

Under Pennsylvania law —specifically, the Pennsylvania Uniform Limited Liability Company Act of 2016 (the “LLC Act”)— LLCs can be structured as either member-managed or manager-managed entities. The company’s operating agreement designates the applicable structure, defining who holds management authority and which decisions require member approval.

In a manager-managed LLC, the manager or managers are responsible for nearly all of the business’s operational and administrative activities. The LLC Act makes clear that, except as otherwise provided, all matters relating to the company’s activities and affairs are decided exclusively by the manager or by a majority of managers if more than one is appointed. This provision grants broad authority for day-to-day management while retaining members’ rights to consent to significant changes.

Duties Commonly Assigned to Managers in Operating Agreements

Most operating agreements assign a core set of responsibilities to managers, aligning with the statutory framework while tailoring additional powers to the business’s needs. Typical duties include:

  • Operational Control: Managers oversee the company’s business strategy, finances, and daily operations — from executing contracts and hiring employees to supervising company funds and maintaining compliance with applicable laws.
  • Financial Management: Managers are often responsible for setting budgets, allocating resources, and approving payments or distributions consistent with the operating agreement and tax rules.
  • Representation Authority: Managers may act as the company’s authorized representative in dealings with banks, vendors, and regulators. This ability allows them to bind the company contractually, making it critical that their authority be clearly outlined in the operating agreement.
  • Oversight of Compliance: Ensuring that the business adheres to its Certificate of Organization, employment laws, and state reporting requirements also typically falls under a manager’s duties.
  • Delegation Powers: An operating agreement may allow managers to delegate specific duties to members, officers, or agents under the LLC Act, giving flexibility while preserving accountability.

Most importantly, these duties derive not only from statutory precedent but from the contractual autonomy Pennsylvania LLC members enjoy. The operating agreement serves as the company’s internal constitution, allowing members to expand, restrict, or redefine managerial powers, so long as modifications do not violate the “manifest unreasonableness” standard under the LLC Act.

The Fiduciary Duties of Care, Loyalty, and Good Faith

The LLC Act establishes baseline fiduciary obligations for managers—primarily the duties of loyalty, care, good faith, and fair dealing. These duties ensure managers act in the company’s best interests rather than pursuing personal gain at its expense.

  • Duty of Loyalty: Managers must account to the company for profits and refrain from competing with or misappropriating company opportunities.
  • Duty of Care: Managers must act with the level of diligence, prudence, and competence that a reasonable person would exercise in similar circumstances.
  • Good Faith and Fair Dealing: Every manager must conduct themselves honestly and in a manner consistent with the company’s contractual expectations.

While these duties are fundamental, Pennsylvania law allows operating agreements to modify them in specific ways. For instance, an agreement may:

  • Define specific actions that do not breach loyalty duties.  This sometimes takes the form of a tailored non-compete provision that excludes certain business activities from its restrictions.
  • Adjust the standard used to assess performance.
  • Limit or waive liability for monetary damages (subject to the LLC Act).

However, such modifications are legally scrutinized —any alteration judged “manifestly unreasonable” will be unenforceable. In practice, it’s exceedingly rare that a well-drafted operating agreement for a legitimate business comes anywhere close to this legal standard.

Despite granting broad authority for routine operations, Pennsylvania law and most operating agreements draw sharp lines around decisions requiring member consent. The LLC Act outlines actions that, absent contrary provisions in the operating agreement (as discussed further below), cannot be taken by a manager alone.  These include:

  1. Acts Outside the Ordinary Course of Business: Managers cannot unilaterally approve actions that significantly change the company’s direction, such as selling significant assets or entering new markets, without member approval.
  2. Amending the Certificate of Organization or Operating Agreement:  These core governance documents can only be revised by unanimous member consent.
  3. Major Structural Changes:  Mergers, dissolutions, conversions, or actions that alter member rights almost always require express approval from all members.

Operating agreements often modify (either expanding or narrowing) these statutory limitations by including provisions for “special consent” or “majority consent” for sensitive transactions, such as:

  • Admitting new members
  • Creating additional classes of equity
  • Approving distribution schedules
  • Authorizing loans, capital expenditures, or compensation arrangements

These consent thresholds protect members from managerial overreach while ensuring that critical actions reflect the collective judgment of ownership.

Customizing Authority in the Operating Agreement

Under the LLC Act, nearly all managerial rules are default provisions — meaning members can customize them through their operating agreement. This flexibility enables small businesses to craft governance terms suited to their size, industry, and ownership structure.

For example, some agreements specify that the manager must seek written consent before executing contracts above a specific dollar amount, acquiring debt, or issuing new equity interests. Others outline tiered approval frameworks — allowing unilateral action on routine matters while requiring a member supermajority for strategic decisions.

Additionally, small business owners frequently include conflict-of-interest and indemnification clauses that define when managers may be reimbursed for liabilities incurred while acting on behalf of the company. The Act expressly permits Pennsylvania LLCs to limit or eliminate manager liability for monetary damages (except for breaches involving bad faith, unlawful conduct, or willful misconduct).

Practical Implications for Small Businesses

For Pennsylvania’s small business community, understanding these nuances is more than academic — it is a matter of operational stability and predictability. Without explicit provisions in the operating agreement, the company defaults to statutory rules, which may not align with practical management needs or the members’ risk appetites.

When drafting an agreement, owners should:

  • Clarify who can bind the LLC contractually
  • Specify duties and authority of managers in granular detail
  • Identify which actions require majority or unanimous member consent
  • Include safeguards against conflicts of interest and personal liability
  • Ensure that all modifications to fiduciary duties comply with Pennsylvania’s “manifestly unreasonable” standard.

Professional legal guidance ensures your operating agreement includes enforceable governance mechanisms tailored to long-term business sustainability.

Defining Manager Roles for Long-Term LLC Stability

The manager of a Pennsylvania limited liability company occupies a position of both trust and authority — empowered to lead operations yet constrained by duties of care, loyalty, and the requirement for member consent on fundamental matters. When properly structured, the operating agreement harmonizes these roles by balancing efficiency and accountability.

For small business owners, taking the time to define the scope of managerial powers can prevent costly disputes, protect member interests, and lay the groundwork for responsible governance. At every stage, thoughtful legal drafting transforms potential conflicts into clear boundaries — enabling the LLC to operate confidently within both its contractual and legal frameworks. Contact us today with any questions you may have.