Single Member LLC Operating Agreement NJ
A single member LLC operating agreement NJ is a document drawn up between a single member and an LLC.3 min read
A single member LLC operating agreement NJ is a document drawn up between a single member and an LLC. The document details the member's rights, obligations, and duties and the LLC's management structure as it is dictated by the SMLLC.
Single-Member LLC Operating Agreement in New Jersey
A single-member LLC (SMLLC) is owned by one person. Operating as an LLC (limited liability company) will limit your liability and allow the SMLLC to function like a "real" business. To operate as an LLC, single members should have the same business documentation as any other LLC owner. Namely, an LLC should have an operating agreement prepared with the aid of an attorney.
An operating agreement describes the LLC's operations and forms agreements between members and the business's owner(s). It is somewhat like the by-laws that guide a corporation's board of directors.
Using the agreement offers substantial liability protection to a single member, to the extent that business and personal practices are kept separate. The document is also useful to a single member who is looking to take out a loan or enter into business agreements or transactions with other businesses.
It also clarifies how LLC funds are distributed to the owner. Drafting an operating agreement will not only help the owner have a robust conversation about operating procedures, but it will also ensure that records of business proceedings are being properly kept.
Benefits of Having an Operating Agreement
Though an operating agreement is not required documentation for the business to run, it's recommended for any LLC to have one. Merely having an operating agreement and keeping records of operations helps reinforce the separation of the business from the owner for tax and liability purposes.
Without an operating agreement, you'll find it more difficult to prove that your business is a separate entity from you. This can be a make or break factor if there is a liability issue.
An operating agreement also stipulates contingency measures. If, say, the owner were to die or be unable to run the business, it creates a plan for succession. Your operating agreement should include a clause stating who will take control of the LLC if you are no longer able to. Without this provision, it could be difficult for your family to continue or discontinue the business without going through a legal battle.
Without an operating agreement, an LLC is subject to the rules of the state where the LLC is organized. Having the state decide how to dispose of your business's asset is far from ideal.
Creating a Single-Member LLC Operating Agreement in New Jersey
You could use online services to draft an operating agreement; however, you'll be far better off enlisting the help of an attorney to tailor the document to your requirements and the requirements of the state.
To better understand the form before filling it out, review the Single-Member LLC Operating Agreement form:
- Step 1: Download the document and enter the name of the sole member under the single-member agreement.
- Step 2: Enter the date the document was executed. Enter the company's name on the provided line. Then review the organization's information.
- Step 3: Under formation of the LLC, enter the company's name and the date. Write out the company's intended purpose.
- Step 4: Under section 9a, enter the sole member's name under "Authority." Review the sections that follow. When you've completed your review of the titled sections, you must enter the name of the company. Enter the LLC's managing member's signature and submit their printed name. This last step must be done in the presence of a notary.
- Step 5: After the signature has been witnessed and recorded by the notary, they will notarize the document.
To form an SMLLC in New Jersey, you must also name your single-member LLC. Include the words “limited liability company,” the abbreviation “LLC,” or a variation of this abbreviation.
The name must be distinct from other business entities on file in the Division of Revenue (DOR) in the New Jersey Department of Treasury. You can check and see if the name you've chosen is available by searching for the business entity name on the DOR's Business Records Service website.
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