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What is an LLC?
If you are in the process of starting your own business, you may consider whether the structure of a Limited Liability Company (LLC) is right for you. An LLC offers many protections to business owners and is relatively simple to form.
In 2013, many significant changes occurred to New Jersey’s LLC Law. As a result, New Jersey has become a more business-friendly state. As of March 1, 2014, all existing and newly formed LLC’s are affected by the following changes of the Revised Uniform Limited Liability Company Act:
- LLCs do not have to indicate in their documents the desire to have perpetual existence.
- An LLC can be formed for any lawful purpose. As a result, an LLC can be formed as a for-profit or a not-for-profit.
- LLCs can convert to another type of business entity, such as a corporation, and other types of business entities can easily convert to an LLC. Additionally, under the new rules, foreign LLCs can domesticate in NJ and become a NJ LLC.
- LLCs are not required to have a written operating agreement. Under the new rules, the operating agreement can be oral or implied. However, in the event an LLC does not have an operating agreement, the LLC will be subject to the Act's default provisions.
- If the LLC's operating agreement does not indicate how profits and losses are to be distributed among the LLC's members, each LLC member is entitled to an equal share of the profits or losses.
- Unless otherwise provided in the LLC's operating agreement, LLC members have equal voting rights on all matters, regardless of the percentages of ownership interests.
- Members of an LLC have a required fiduciary duty to act in the best interest of all the members and the LLC.
- By filing a 'statement of authority', an LLC can confirm a certain member's, or non-member's, authority to bind the LLC in particular business transactions.
- Withdrawing members of an LLC do not have the automatic right to be bought out. Additionally, withdrawing members only retain economic rights in the LLC after withdrawal.
- Under the new rules, if illegal conduct or conduct that is oppressive to minority members of the LLC is shown, the NJ Superior Court has the authority to dissolve the LLC or appoint a manager
If you are in the process of starting a business, or have questions concerning the implementation of the new LLC laws in New Jersey, the Law Offices of Hunziker, Jones & Sweeney are skilled and knowledgeable in all aspects of business law. Contact the firm for a consultation at (973) 256-0456 or fill out our contact form for a consultation.