Manager-managed is usually the better choice; member-managed may fit a holding-company subsidiary when it protects public-record privacy
A member-managed LLC gives management authority to its members. A manager-managed LLC places day-to-day authority in one or more designated managers, who may or may not be members. I generally recommend manager-managed LLCs. The narrow exception is a subsidiary owned by a holding company when naming the holding company as the member on the state's public annual report keeps the individuals' names off that report under that state's rules.
Member-managed LLC
I recommend this only for a specific holding-company privacy reason.
In a member-managed LLC, the members have authority to manage the company. I generally do not recommend this structure for an operating LLC.
The exception is a subsidiary owned by a holding company LLC when the state's public annual report identifies the member and allows the holding company to be listed there. If that listing keeps the individual owners' names off the report, member-management may help preserve their privacy. Check the state's filing and disclosure rules first; this does not guarantee complete anonymity.
Manager-managed LLC
My usual recommendation for an LLC.
A manager-managed structure separates ownership from day-to-day authority. It lets a designated manager handle ordinary business decisions while members retain the approval rights stated in the operating agreement.
This structure can work well for a single-member LLC, a business with passive investors, an owner who wants to remain in charge, or a company that may add owners later. It also gives the LLC a clear representative for banks, contracts and routine operations.
The operating agreement should define the manager's authority and explain how managers can be removed or replaced. Members can reserve major decisions for themselves.
Make the documents consistent
The filing, operating agreement and actual conduct should match.
Some states ask for the management structure in the formation filing. The operating agreement should identify the managers, define their authority, reserve major decisions for the members and explain appointment, removal and replacement procedures. If using a member-managed subsidiary for privacy, confirm that the state filing permits the holding company to be listed as the member without disclosing the individual owners.
Banks, counterparties and title companies may request resolutions or other evidence of authority. Clear records reduce uncertainty about who can act for the company.
Questions to answer first
Focus on how decisions will be made in practice.
Who runs daily operations?
Identify the person who will negotiate, sign, hire, spend and supervise. That person can be named as manager.
Are any owners passive?
A manager-managed structure can give passive members approval rights on major matters without involving them in ordinary operations.
Which decisions require owner approval?
Reserve major transactions, new debt, ownership changes and dissolution as appropriate.
Does a subsidiary filing preserve privacy?
Use member-management for this reason only if the state's annual-report rules allow the holding company to be listed as member and that public filing does not reveal the individual owners.
Carry the management choice into the formation filing.
Use the state-specific guide for the name, registered agent, filing and next steps.