New LLC Rules Take Effect in New Jersey

New LLC Rules Take Effect in New Jersey

For many New Jersey business owners, the limited liability company framework offers a number of advantages. Most notably, it limits personal liability for business debts and court judgments against the business and shields an owner’s personal assets.

Under new rules that took effect on March 18, LLCs may now be even more attractive to New Jersey business owners. The large-scale overhaul contains several key changes intended to overhaul New Jersey’s regulations governing LLCs and make them more business friendly. 

Under the New Jersey Revised Uniform Limited Liability Company Act, the following changes are currently in effect for all new LLCs and will govern existing New Jersey LLCs beginning on March 1, 2014:

• Duration: Like corporations, LLCs will now have a perpetual duration unless the operating agreement specifies otherwise.
• Purpose: LLCs can now be formed “for any lawful purpose, regardless of whether for profit.” This clarifies that LLCs may be used to carry out non-profit operations.
• Operating Agreements: Governing agreements are no longer required to be in writing, but may be oral or implied.
• Statement of Authority: The new law provides for the use of statements of authority, which establish the authority of certain individuals to act on behalf of the LLC. The documents will be filed with the Office of Commercial Recording.
• Resignation Rights: A resigning member of an LLC will no longer be entitled to receive the fair share value of the member’s LLC interest. Under the new rules, a resigning member is dissociated from the LLC and only has the rights of an economic interest holder.
• Member Oppression: The new rules provide certain remedies for minority members. For example, a member may seek a dissolution order from the New Jersey Superior Court on the grounds that the controlling members have acted in a manner that is oppressive or harmful.
• Conversion and Domestication: LLCs may now easily convert to another legal entity and vice versa. In addition, foreign LLCs may domesticate and NJ LLCs may transfer to the jurisdiction of another state.

If you have any questions about the new law or how your business may benefit, please contact me, Mark Follender, or the Scarinci Hollenbeck attorney with whom you work.