Q: What legal authority prevents the owner of a LLC from representing the LLC in court?

A: Unless the articles of organization state that the LLC is managed by managers, the LLC is managed by members (commonly referred to as “owners”). MCL 450.4401. The managers in a manager-managed LLC and the members of a member-managed LLC have the authority to bind the LLC. The Michigan Court Rules do not specifically address an LLC’s capacity to sue or be sued, but they do state that a “partnership, partnership association, or unincorporated voluntary association having a distinguishing name may sue or be sued in its partnership or association name, in the names of any of its members designated as such, or both.” MCR 2.201(C)(3). A Michigan LLC is an unincorporated membership organization, MCL 450.4102(2)(k), which most likely fits MCR 2.201(C)(3). Thus, you would need to look elsewhere to prove that the “owner” you are referring to lacks authority to act on behalf of the LLC.

The LLC’s operating agreement, including any exhibits, attachments, and amendments to that agreement, is critical in this scenario. First, this will help determine whether the “owner” you are referring to is, in fact, a member of the LLC. If the “owner” is neither a member in a member-managed LLC nor a manager in a manager-managed LLC, that individual likely does not have the authority to maintain the lawsuit on behalf of the LLC. Additionally, a well-drafted operating agreement will specify who has the authority to commence, defend, or maintain litigation or proceedings in the name of the Company and identify any rights and duties that are either restricted or enlarged. You may find that someone else has the authority to maintain the lawsuit in the LLC’s name.

If you can accurately determine that the “owner” is a member of the LLC, and either the operating agreement is silent on the issue or the LLC does not have an operating agreement, that member most likely has the authority to maintain the lawsuit.