Key Takeaways:

  • To change ownership in an NJ LLC, you must file the L-102 Certificate of Amendment with the NJ Division of Revenue.
  • You can submit the amendment online, by mail, fax, or in person, and it must be typed, not handwritten.
  • If adding a new member, update the Operating Agreement to reflect their role, capital contributions, and voting rights.
  • A Buyout Provision in the Operating Agreement is crucial for partial transfers of LLC ownership.
  • For a full ownership transfer, a Purchase Agreement and updated filings with the state and IRS may be required.
  • New Jersey LLCs must update their Federal Employer Identification Number (EIN) and tax filings when ownership changes.
  • Proper legal guidance is recommended for tax and compliance considerations.
  • If you need assistance, you can connect with experienced attorneys on UpCounsel.

What Is the New Jersey LLC Certificate Amendment?

Although you can change the information pertaining to management members or managers when you file an annual report for an LLC, if you're dealing with one from New Jersey, you need to have a few different forms.

You can file the L-102 form, also known as a certificate of amendment, to amend the certificate of formation. In addition, you can file one of several forms found in the New Jersey Business Registration Packet. Both the L-102 and packet are available on the state's Division of Revenue website.

If you're the owner of a New Jersey LLC, you can change the business or registered agent name with a business entity amendment form. You can create your own documents, but the division suggests that you use its form. The division will deny your request if you fail to include all the pertinent information.

When to Change Ownership in an NJ LLC

There are multiple reasons why an LLC in New Jersey may need to change ownership, including:

  • Adding a new member due to business growth or new investment.
  • Removing a member who is retiring or leaving the business.
  • Transferring ownership due to a buyout, sale, or death of a member.
  • Changing ownership structure due to a merger or acquisition.

For each scenario, proper documentation and state filings are required to ensure compliance with New Jersey business laws.

How Do I File a Certificate Amendment?

To submit the amendment, you can do so via mail, fax, or hand delivery. For mailing and personal delivery, remember to submit the original and duplicate copies. The division will not accept handwritten paperwork; you must type all filings.

When submitting the amendment to the New Jersey Division of Revenue and Enterprise Services (DORES), remember to include the following on a cover letter:

  • Name of business or person submitting the paperwork.
  • Payment method, either by credit card or check, as the Division does not accept cash.
  • Payment credit card number or check number along with billing address.
  • Description of the filing such as a certificate of amendment.
  • Business identification number.
  • Return instructions, including the return address.
  • Check payable to the Treasurer, State of New Jersey since DORES does not accept cash.

In addition, you can file two other forms regarding the name or registered agent changes. You can submit the L-111, which is the Restated Certificate of Formation, or L-112, which is the Restated and Amended Certificate of Formation, with the New Jersey Division of Revenue.

In the initial certification, you must include the names and addresses of any specific managing members or managers, that way you can change any information once you file an amendment. You can also change the information once you file the annual report for your LLC.

Keep in mind that if you add a member, especially a spouse, you need only the issuance of membership units. You can gift the units to the individual, sell the units, or have the new member make a capital contribution. Also, corporations can belong to an LLC as long as the LLC does not allocate taxes through an s-corp.

For additional information from the New Jersey DORES directly, contact its business tax hotline at 609-292-9292.

If you are unsure about certificate amendments, hire a lawyer or accountant to walk you through the process. If you plan to file taxes before next year, the accountant can amend the forms before filing. From there, you may need to vote since you are the only partner, so the LLC can take the capital.

Steps to Change Ownership in an NJ LLC

To add or remove a member from an NJ LLC, follow these steps:

  1. Review the Operating Agreement:
    • Ensure the agreement allows changes in ownership.
    • Check for buyout clauses, voting requirements, and contribution terms.
  2. Obtain Member Approval:
    • If the LLC has multiple members, a vote may be required.
    • Document approval through a written resolution.
  3. Prepare the Transfer Agreement (if applicable):
    • If an existing member is selling their share, a Purchase Agreement should outline the terms.
    • Specify the transfer price, payment terms, and rights of the new member.
  4. File the L-102 Certificate of Amendment:
    • Go to the NJ Division of Revenue website and submit Form L-102 online.
    • Provide the LLC name, business ID, and new ownership details.
    • Pay the $100 filing fee.
  5. Update the Operating Agreement:
    • Reflect new members, ownership percentages, and management roles.
  6. Notify the IRS and State Tax Authorities:
    • Update the EIN details with the IRS if the LLC’s tax classification changes.
    • Submit Form NJ-REG to ensure proper tax filings.
  7. Update Business Licenses and Bank Accounts:
    • Change ownership details with banks, vendors, and regulatory agencies.
    • If necessary, file for a new business license reflecting the ownership change.

Operating Agreement

An important aspect to remember is that you can operate without an operating agreement as long as you have a single-member LLC. However, in order to bring in an additional member, you must have a solid operating agreement. Without a quality operating agreement, you and your partner must adhere to the state's standard limited liability act. It's a good idea to hire a lawyer who can prepare this paperwork.

Pertaining to taxes, you must have a nine-digit Federal Tax Identification Number. Instead of having your accountant use the Schedule C on your Form 1040, they can prepare a Federal and NJ Form 1065.

Make sure that your operating agreement includes information about disability, disagreement, and death.

Keep in mind that members have the right and power to force out anyone who does not pull his or her own weight. If expelling is not an option, you can deny membership or insist that the person cannot have a say in management but still shares in profits.

Partial vs. Full Ownership Transfers in an NJ LLC

Ownership transfers can be partial or full:

  • Partial Transfer (Adding or Removing a Member):
    • Use a Buyout Agreement if an existing member sells their share.
    • Follow the procedures outlined in the Operating Agreement.
    • File the L-102 amendment form with the NJ Division of Revenue.
  • Full Transfer (Selling the Entire LLC):
    • Draft a Purchase Agreement to sell all ownership rights.
    • Notify the NJ Division of Revenue and IRS.
    • File an LLC dissolution form if the business is closing.

Proper documentation ensures a smooth transition and avoids legal disputes.

Frequently Asked Questions

  1. How long does it take to process an ownership change for an NJ LLC?
    The NJ Division of Revenue typically processes amendments within 7-10 business days if filed online.
  2. Do I need a new EIN if I add a member to my LLC?
    No, but you should update the EIN with the IRS if the tax classification changes.
  3. What is the filing fee for changing ownership in an NJ LLC?
    The L-102 Amendment costs $100 to file with the NJ Division of Revenue.
  4. Can I transfer ownership of an NJ LLC without an Operating Agreement?
    Yes, but the state default rules will apply, which may not align with the members’ intentions.
  5. What happens if a member leaves without an agreement in place?
    The LLC may need to dissolve or restructure based on NJ state laws.

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