Written by New Jersey LLC Law Attorney Fredrick P. Niemann, Esq.
The attorneys at Hanlon Niemann & Wright have written all types of operating agreements addressing all types of business issues and situations. Because of this we are able to evaluate and counsel you on issues you face in the real world of business all the time. It’s that experience that also helps us represent you if things go terribly wrong. Fredrick P. Niemann, Esq. and the lawyers at Hanlon Niemann understand NJ LLC laws and the issues that must be considered to protect your LLC.
Understanding exactly what an LLC is… and what it is not is a good starting point for our discussion. A limited liability company (LLC) is a hybrid business organization. This means it combines the features of both a corporation and a partnership yet it is neither a corporation nor a partnership under New Jersey law. Instead an LLC is organized by the agreement of its members each being free to make any agreement(s) they choose among themselves. In addition, federal and state tax laws generally recognize and treat an LLC as a partnership, meaning taxable gains and losses flow to the members personally and are reported on their individual 1040 tax returns. Therefore, if the LLC is structured properly, no federal income tax is payable directly by the LLC; rather, any taxable gain is passed onto the members through a K-1 when a profit is earned.
An LLC is formed when the certificate of formation is filed in the Division of Revenue in the Department of the Treasury unless the certificate provides for a different effective date, and the LLC has at least one member.
Statement of Authority
The act requires a document known as a statement of authority to be filed in the Division of Revenue. This instrument provides public notice that one or more persons within the LLC have authority to act on behalf of the LLC. The statement of authority can describe the scope as well as the limitations on the named individual’s authority and can direct the reader to the person or office, should communication be intended.
The provisions of the LLC act state that an LLC is managed by its members unless the operating agreement provides for one or more managers to assume that role. The act provides that each member in a member-managed LLC has equal rights in management. Thus, a 25% (percent) member has the same rights as a 75% (percent) member in the LLC, unless there is an operating agreement which provides otherwise.
Distributions of Profits
This is a big deal under the Act. The default rule is that distributions to members are to be made in equal shares among the members, rather than pro rata according to their capital contributions or capital accounts. This may contradict the expectation of the members, particularly those who have made larger capital contributions than their co-members. To reverse this default rule the members can provide a different formula in the operating agreement.
Limited Personal Liability
Similar to shareholders of a “C” or “S” corporation, New Jersey grants the members of an LLC broad (but not absolute) statutory protection from personal liability. Instead an LLC member risks only the capital that the member invests into the LLC. So if you’re contemplating the creation of an LLC and want to address the important points of your agreement in writing, I invite you to contact me toll-free at (855) 376-5291 or email me at firstname.lastname@example.org . If you read further into this page and in later pages, you’ll appreciate how much better off you’ll be if you put your LLC agreement on paper. The legal casualties of not doing so are many.
I own several small businesses. I’m good at what I do but legal matters and dealing with lawyers and legal issues is stressful. I called Fredrick P. Niemann and have developed a great relationship with his lawyers and staff. They have reviewed my leases, negotiated the buyout of my former business partner, handled land use problems in a neighboring county and generally have really been there for me. I really like them personally and professionally.
If you are a small business owner, give them a call.
– Mike Halsey – Middletown, New Jersey
Please view our informative video on NJ LLC Law
CALL US IF PROBLEMS DEVELOP IN YOUR LLC
Many of the most successful small and medium-sized LLC’s in NJ are founded on a strong relationship between two or more members. But if the relationship breaks down, the consequences can be devastating. It’s hard to be objective when your company interests are being threatened and it seldom makes sense for those involved to sort out the problem themselves. If not resolved quickly and decisively, company or member disputes can deplete business resources and focus.
Many attorneys and/or law firms only offer transactional services. When faced with the prospect of a lawsuit and court room, they’ll quickly bail out and refer their LLC members (you) elsewhere. Not us, we’re with you all the way and we’ll continue to serve you throughout the entire case.
We’ve tried to conclusion many types of LLC disputes involving expulsions, member resignations; breaches of non-compete and restrictive covenants, contract and insurance clauses and tortuous business practices.
This is just some of our significant Limited Liability Company litigation background. If your case involves an actual or potential LLC dispute, lawsuit or conflict among members and you would like to speak to a firm member personally, call Fredrick P. Niemann toll-free at (855) 376-5291 or e-mail him at email@example.com. At Hanlon Niemann & Wright, we are experienced NJ business and LLC lawyers who will champion your interests with confidence.
Fredrick P. Niemann, Esq.
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