Operating Agreement LLC NJ: Everything You Need to Know
An operating agreement LLC NJ forms the core of the New Jersey organization and is a legally binding document that outlines its structure and daily business activities3 min read
2. Revised Law
3. Types of NJ Operating Agreement
4. Multi-Member Governance
5. LLC Type
7. Benefits of LLCs
Operating Agreement LLC NJ
An operating agreement LLC NJ forms the core of the New Jersey organization and is a legally binding document that outlines its structure and daily business activities. An operating agreement does not have to be filed with NJ authorities, but it should be made available to all members of the LLC.
Even though operating agreements are not required under state law, all LLCs should have one in place to determine the rights and duties of each member. Operating agreements are also safeguards against any legal liabilities that may arise from unsatisfied debts and will outline a member’s rights if any dispute occurs.
Under a revised law called the Revised Uniform Limited Liability Company Act, the state defines an operating agreement as written or oral communication that outlines the rules, rights, and duties of the LLC. This also means that any discussion pertaining to rules and guidelines within the business is automatically considered a legally binding agreement that all parties must adhere to.
For this reason, all parties must ensure that oral communication matches rules or agreements established on paper to avoid miscommunication. Additionally, LLCs must secure an owner’s wishes, and amendments must be added to make sure all parties are on the same page.
Also, an operating agreement does not have to be referred to as an operating agreement within the organization. In essence, it is simply an agreement between all members of the LLC, and members should be aware of the rules and stipulations before an LLC begins business operations. This new law applies to an LLC created after March 2013.
Types of NJ Operating Agreement
There are two types of operating agreements to be aware of: multi-member and single-member.
- Multi-member: This type of document is reserved for more than one member of the organization. It outlines all duties of each member, including any financial ties to partners and managers.
- Single-member: This one is reserved for sole members and should record daily operations. As with multi-member operating agreements, the single version should divide personal and business activities to maximize legal protections.
All managing members must select a registered agent before all paperwork is filed. The registered agent accepts legal documents for the company. Such legal documents could include court papers or any paperwork from the state. In addition, registered agents should file annual reports for the LLC and any other necessary paperwork.
A registered agent can be:
- A resident of New Jersey
- Any person with authorization to conduct business in the state.
An LLC can come in two forms: domestic or foreign. A domestic LLC is one filed within NJ, while foreign status LLCs are reserved for out-of-state ones. When filing, you must choose whether your LLC is domestic or foreign. You can find the application here.
Moreover, foreign status LLCs must also submit a Certificate of Existence to provide valid proof of the company’s existence. Regardless of status, filing fees usually amount to $125 from the Division of Revenue.
An Employer Identification Number (EIN) is the business version of your Social Security Number, identifying your business for tax purposes. An EIN can be obtained for free at the official IRS website. Moreover, an EIN is a good way to keep your business functions separate from your personal assets. An EIN is especially crucial if you intend to hire workers.
Benefits of LLCs
Once you create the LLC, you can do such things as open business bank accounts, apply for business credit, or hire new employees. Having a business account divides your personal and business assets while staying organized in the process. Further, getting a business credit card establishes and builds credit for your business, which is crucial when you need additional capital to expand your business.
Under NJ law, an LLC has greater advantages than sole proprietorships, partnerships, or corporations. For instance, LLCs allow pass-through taxation, where the individual is taxed instead of the business. Pass-through taxation also avoids double taxation because you are taxed solely on your personal tax filings.
Additionally, LLCs are protected from personal liabilities in the form of judgments or debts, but business activity must remain separate from personal endeavors. Combining personal and business assets may open you to personal liability.
Another advantage is the overall flexibility that LLCs allow its members. Members do not have to conduct annual meetings like corporations do. In addition, corporations must also keep records of business activities, and meetings must be recorded.
To learn more about operating agreements for NJ LLCs, post your legal inquiry on our marketplace. UpCounsel retains a pool of top lawyers who graduated form some of the most prestigious universities in the nation, allowing you to benefit from their extensive knowledge and experience in areas pertaining to business law. Our help will guide you through the drafting and implementation of any operating agreement.