Thinking about entrepreneurship; already an entrepreneur? The Union, New Jersey business lawyers at The Jayson Law Group, LLC have some things for you to consider. There are several different types of business entities available in the state of New Jersey: a corporation, a DBA or sole proprietorship, a partnership, and a limited liability company. A limited liability company, or LLC, is a business entity that utilizes characteristics of both a corporation and a sole proprietorship. Like a corporation, the owners of an LLC are not personally liable for company debts. Like a sole proprietorship, an LLC has operating flexibility and a “pass through” entity for tax purposes. Meaning that the LLC does not directly pay taxes on its profits, but rather profits and losses are “passed through” to the owners who must then pay tax on their share of the LLC income. Ultimately, an LLC can offer personal protection, reduce taxes, and has fewer formalities than a corporation.
Effective as of March 18, 2013, the New Jersey Revised Limited Liability Company Act amends the existing law in respect to operating agreements, entity duration, member relations, and other aspects of LLC entities. Entities formed after March 18, 2013 are governed by the Revised Act’s new laws and regulations. However, pre-existing entities are governed according to the prior version of the New Jersey LLC Act (“the Prior Act”), but will be required to adopt the Revised act as of March 1, 2014. The Jayson Law Group has provided this brief guide of a couple of the changes in the Revised Act affecting new and existing New Jersey LLCs.
Operating Agreements:
Before the Revised Act the operation of the LLC was subject to the default provisions of the Prior Act, if there was no written operating agreement to the contrary. The Revised Act permits the operation of the LLC to be governed by an oral or implied operating agreement.
In addition, the Revised Act also permits limitations on amendments to the operating agreement to include only those that satisfy a condition or approval of a person not party to the operating agreement. For example, amendment limitation could be valuable to a lender who may want to approve the future amendments of an LLC operated by a borrower.
Duration:
Under the Prior Act, LLCs had a limited existence, unless otherwise state in the Certificate of Formation of the LLC. But under the Revised Act, LLCs have the opportunity for perpetual duration, much like the perpetual life of corporations.
The Revised Act provides LLCs with improved flexibility and opportunities for operation in New Jersey. Both new and existing operating agreements should be drafted and revised by a business attorney in order to ensure optimal functionality. Feel free to contact the New Jersey business lawyers at The Jayson Law Group today for a consultation. Either use the contact form in the sidebar or call us today at (908) 258-0621 to get started building your business’ future. We can assist manufacturing companies, general contractors and other small businesses.