A New Jersey LLC Operating Agreement is a legally binding document that outlines the internal structure of a company, including its daily operations and management structure.
As a result, company members that have this agreement can protect their private assets from losses in case of any legal actions against the business.
The document has a list of names of all members alongside their roles and responsibilities. With an operating agreement, the company members can have an outline of the business. This includes the voting rules, profit distribution, and modifications to the agreement like when a merge happens or a new member joins the company.
The state of New Jersey bases its need for companies to prepare and use the New Jersey LLC operating agreement on the Revised Uniform Limited Liability Company Act (Title 42, Chapter 2C), Operating Agreement Laws (§ 42-2C-11), and State Definition (§ 42:2B-2) found in its Statues database.
Having a New Jersey LLC operating agreement will come at a small cost. The New Jersey LLC formation comes at a fee of $ 125 while the New Jersey LLC annual report costs $75 every year.
Types of Operating Agreement
There are different types of the New Jersey LLC operating agreements you may have to prepare, based on your requirements, as a company in New Jersey State.
These types vary in terms of the company members and owners:
Single-member LLC
This contract is meant for LLCs that have single owners. The document is meant to outline the company’s day-to-day operations and protect the owner’s assets in the case of litigation against the company.
Download: Microsoft Word (.docx)
Multi-member LLC
LLCs that have several owners usually prepare this document. It helps to highlight the breakdown of ownership and financial decisions among the company owners and members.
Download: Microsoft Word (.docx)
Member-managed LLC
This document is used by companies in New Jersey whose members agree to run the business and other daily operations together. This is based on the agreed-upon instructions and signed contract.
Download: Microsoft Word (.docx)
Manager-managed LLC
This contract is prepared by companies with more than one owner and chosen manager (s) to deal with the day-to-day business operations. The remaining members only contribute to the company’s daily operation by voting as investors or passively. However, those members not chosen as managers have a say when it comes to voting for the manager(s).
Download: Microsoft Word (.docx)
Advantages of Agreement
Whether it is a big or small company, having an LLC operating agreement in New Jersey State is beneficial. Here are some of the advantages of preparing and using the New Jersey LLC operating agreement:
Personal liability protection
Having an LLC operating agreement helps protect the company owner(s) from any legal issues that may affect the company. For example, company members will not have to face any personal liability in litigation or business debts. In addition, the agreement helps to separate the owners and the company. The owners are viewed as individuals separate from their company, which is an entity on its own.
Business credibility
With the New Jersey LLC operating agreement, company owners in this state can have credibility regarding their company. Banks will allow such companies to open bank accounts. Also, lenders will grant loans to such companies due to the agreement. The contract provides details about the company’s operations, and this serves as business credibility.
LLC flexibility
As a registered Limited Liability Company, this status provides flexibility for most companies. However, having the agreement increases the LLC flexibility helping company owners run their business with minimum interference from the state.
In addition, the responsibilities of members, managerial structures, and other business operations can be well handled with no supervision if the company has this agreement.
Sanctity
With the New Jersey LLC operating agreement, company owners do not have to worry about the state laws used to make any company decisions. Instead, the agreement provides sanctity for the company. Any rules and guidelines included in the agreement will be used to make all company decisions without interference from the state laws.
Revisions in New Jersey Operating Agreement
Company members who have registered with the LLC usually prepare the New Jersey LLC operating agreement based on the LLC Act in the Statutes database of New Jersey State. The Revised LLC Act currently governs this agreement as of 2014. With this in mind, company owners should be aware of the changes made to the Act.
Some of the revisions made include:
Agreement amendment method
Although New Jersey State offers operating agreements for LLCs, the Revised LLC Act allows companies to create their operating agreements. This is to ensure that companies can override the state by having an oral or implied agreement.
Member resignation practices
The Revised LLC Act allows a resigning LLC member to maintain their shares but does not give them the right to vote in any company decisions. As a result, these disassociated members will receive their profits from the distributions made next and not immediately after they have resigned.
Changes to member resignations practices can be made in the New Jersey LLC operating agreement.
Fiduciary duties
All LLC members must observe their Fiduciary duties. However, the Revised LLC Act allows changes concerning these duties but only if effected in the operating agreement. Therefore, without any amendments made in the agreement, all members must faithfully uphold their Fiduciary duties.
Indemnification
The Revised LLC Act allows for member indemnification if the company has no operating agreement and New Jersey State laws apply in the matter. However, if the operating agreement exists, then no indemnification is allowed.
Information to be Included
The following information should be included in the New Jersey LLC operating agreement to observe the statutes that govern the operating agreement. These details are valuable and help to outline all the company’s operations and internal structure:
Basic information
Some basic details must be included in the agreement. This includes the LLC name as it appears in the Articles of organization, LLC effective date, the name of the registered agent, purpose, and duration of the LLC, plus related tax information.
Ownership
Members who own the company must have their names written in the agreement alongside their ownership percentage. This percentage is mainly based on the investments made by that particular member. At times the ownership might be equal among these members.
Contribution
The initial capital distribution of each member must be included in the agreement. This is the first amount of money deposited in the LLC bank account. These initial contributions help to determine ownership and, in some cases, profit division.
Distributions
Distributions involve how profits will be divided among the members, which are usually determined by each member’s initial contribution. This information should also include when the profits are divided among the members.
Managerial structure
The most common managerial structures are either member-managed or manager-managed. The agreed-upon structure must be written in the document to have a clear breakdown of the managerial tasks and how the daily company operations will be handled.
Statement about taxes
Information about how the New Jersey LLC taxes will be paid should also be made clear in the agreement. It would be best to remember that this information should be similar to the one chosen when registering for the company’s EIN.
Member duties
The member’s duties and responsibilities can be determined and included in the agreement based on the chosen management structure. These duties include running the business and handling daily operations. Both managerial and non-managerial duties must be well written in the document.
Voting rights
Whether the voting rights will be given to all members or only owners must be well indicated in the document. This means that the voting rights must be well allocated to allow for proper decision-making.
Meeting guidelines
The agreement should include information about obligatory and additional meetings. It should also state the schedule of these meetings and the consequences for failing to attend the meetings. Subjects to be discussed during these meetings can also be mentioned to determine the reasons for holding meetings.
Buyout and Buy-Sell rules
Rules surrounding how to deal with existing members who are leaving and new members who are joining should also be included. This will determine how the leaving member will receive their shares and how the new member will join the company with no disruptions.
Succession planning
The agreement should also contain information about what should be done in case a member dies or retires. This includes information about what will happen with the percentage ownership. These provisions may be distributed among the members or given to their family members.
Dissolution
In case the company dissolves, there should be plans in place for handling such a situation. This may include what happens to the current projects, how to divide the profits and other regulations that will benefit the business. Also, $100 must be paid alongside filing a Certificate of Cancellation once the LLC dissolves.
Modifications
The section should be added to ensure proper contingency plans if the members want to modify the agreement. Such changes may include voting rights, membership eligibility, and welcoming of new members.
Severability provision
This clause is included in the agreement to protect the document from complete nullification if any section of the contract is wrong and illegal. Only the particular section will be removed without having terminated the whole contract.
Operating Agreement Template
There is an easier and faster way of doing so for company owner(s) and member(s) in New Jersey who wants to prepare the New Jersey LLC operating agreement. Access and download New Jersey LLC operating agreement templates given here. These templates are free and easily downloadable.
You can access the single-member, multi-member, member-managed, and manager-managed LLC operating agreement templates. Download the template you want based on your requirements.
How to Form Operating Agreement?
Company members in New Jersey should strive to have an operating agreement. Before forming an LLC operating agreement in New Jersey, members should go through the State’s Records to confirm that their LLC name is unique and is not similar to the names of any previously filed LLCs.
For company owner(s) in New Jersey who wish to have an operating agreement, here are the steps to follow to form a valid LLC operating agreement in New Jersey and benefit from the contract.
Registered agent
The company’s managing members should elect a registered agent to represent the company and handle all the processes. The registered agent should be a resident of New Jersey and must have the ability to conduct business in the state.
LLC type
The agent will then choose a domestic or foreign LLC type based on the company’s filing situation. A domestic LLC is meant to file a new LLC within the state, while a foreign LLC is meant to file an existing LLC created outside the state.
File the application
The next step is to file the domestic or foreign LLC through New Jersey’s Online Portal. Finally, a Certificate of Existence should be filed alongside a foreign LLC.
Fee
The next step will be to pay the required fee of $125 filing fee for LLC applications. For online filing, there will be a step that requires payment before filing is complete. If using mail, evidence of payment should be filed alongside the application and sent to the address below:
New Jersey Department of the Treasury, Division of Revenue & Enterprise, Services/Corporate Filing Unit P.O. Box 308, Trenton, NJ 08646-0308
LLC operating agreement
The LLC operating agreement can now be drafted at this step. It can be a single-member, multi-member, member-managed or manager-managed New Jersey LLC operating agreement.
EIN
The IRS requires this Employer Identification Number to help track company tax reports.
It is free and easily obtained on the IRS website. A company with the EIN can hire new employees, open bank accounts, and request credit cards.
Frequently Asked Questions
Companies in New Jersey are not required to have an LLC operating agreement but must have it if they wish to form an LLC.
Single-member LLCs also need an operating agreement in New Jersey. This agreement will enable them to have better LLC flexibility and protect their assets from the business assets.
Company member(s) do not have to send their New Jersey LLC operating agreement to the state. However, this contract should be kept well alongside other business documents.
Different parties like the bank, lenders, lawyers, tax professionals, accountants, investors, and even the courts may need to see your operating agreement for credibility purposes.
New Jersey LLC operating agreements do not require notarization. The document becomes legally binding once signed by all members.
