Business Entities – Authority to act on behalf of an LLC or Corporation

Minnesotans start thinking about vacations this time of year. For small business owners getting away for a week or two presents some challenges, and an unexpected health event or accident presents even more challenges. Successful business owners are skilled at managing the many aspects of running a small business, but they need a break from time to time just like the rest of us. So, who can take care of business while they’re away or unable to?

Many small businesses are owned and operated by a single person. The owner wears all the hats for the business entity. For a limited liability company (LLC), the single owner is the member, manager (if manager-managed), governor (if board-managed), and fills all the officer roles, Chief Manager, Chief Financial Manager, and Secretary. For a corporation, the single owner is the shareholder, director, CEO/President, CFO/Treasurer, and Secretary.

Most single business owners don’t think about what aspects of running a business are fulfilled by each of these roles. They just get the work done that needs to get done. It’s these roles, however, that provide an opportunity for a business owner to hand off responsibilities to another person and grant that person the authority to act on the business’ behalf.

The Minnesota Statute governing LLCs (Minn. Stat. §322C) allows an LLC to be managed by its owner/members, a manager, or a board. A Manager who is not an owner/member can be named to run the LLC business. Minn. Stat. §322C places some limitations on the authority of an LLC Manager, but otherwise it would be up to the owner/members to decide what the Manager could and could not do. Likewise, if an LLC is board-managed, persons who are not owner/members can be elected governors to the board and appointed as officers of the LLC.

Whether managed by a Manager or a board and officers, the LLC’s Operating Agreement should describe in detail the responsibilities and the extent of the authority granted to the persons fulfilling these roles. Minn. Stat. §322C also allows for an LLC to file a ‘Statement of Authority’ with the Secretary of State thereby informing the public that a certain person has authority to act on behalf of the LLC. A Statement of Authority can be particularly helpful for real estate transactions.

The Minnesota Statute governing corporations (Minn. Stat. §302A) requires a corporation to be managed by a board of directors and requires a chief executive officer and chief financial officer to be named. The governing structure of a corporation is more formal than an LLC, but it too offers an opportunity for a business owner/shareholder to delegate certain authority and responsibilities to a non-owner. So, for example, a business owner who is the sole shareholder of a corporation could serve as the director on the board, elect herself as CEO/President, and elect another person as CFO/Treasurer, thereby delegating certain duties and authority with respect to financial matters for the corporation. Like the Operating Agreement, the corporation’s Bylaws should set forth a specific description of the authority of an officer of a corporation.

The options described above are more long-term options for delegating authority if you own an LLC or corporation. What about short-term options? Executing a power of attorney is a good short-term option for a business owner. The power of attorney document can be specifically limited in scope, duration, or conditioned on certain events taking place. A ‘springing power of attorney’, for example, becomes effective only upon the incapacitation of the principal / business owner.

If you’re a business owner who’s ready to delegate responsibilities and authority or if you’re just ready to go on vacation, contact your attorney to discuss what option might be a good fit for you.

Any requests for topic suggestions may be sent to Although we cannot give you legal advice through the column, we can provide some general information that may be helpful for you to know. Our purpose is to educate and we hope that you can take something new away from this column each time you read it.