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New LLC Law to Govern All New Jersey LLCs Effective March 1, 2014


2/28/14

Synopsis

On March 1, 2014, the Revised Uniform Limited Liability Company Act (RULLCA, or the “Revised Act”), signed into law in 2012, will become fully effective and apply to all New Jersey limited liability companies (LLCs), thereby repealing the old law. This revision to the state statute governing LLCs introduces significant changes that will affect newly formed and existing New Jersey LLCs.

Issue

In 2012, Governor Christie signed the Revised Act into law, repealing the New Jersey Limited Liability Company Act with the intent to replace it with a more modern regulatory scheme for the creation and operation of LLCs in New Jersey. Some of the more significant changes in the Revised Act include:

  • Perpetual Duration. The Revised Act eliminates the default rule that LLCs have a limited life. As is the case with corporations, the revised law provides for LLCs to have perpetual duration.
  • Operating Agreements. The Revised Act permits operating agreements to be oral, written, or implied based on the way an LLC has operated.
  • Distributions. Unless otherwise agreed, the Revised Act provides for distributions to be made on a per capita basis.
  • Statements of Authority. The Revised Act allows an LLC to file statements of authority with the Department of the Treasury authorizing certain people or entities to bind the LLC.
  • Dissociation of a Member. Under the Revised Act, a resigning owner is no longer entitled to receive the fair value of an LLC interest as of the date of resignation; instead, the resigning owner is dissociated as a member and only has the rights of an economic interest holder.
  • Deadlock and Oppression. The Revised Act provides remedies for oppressed minority owners, allowing for dissolution of the company and for appointment of a custodian on proper application to a court of competent jurisdiction. 
  • Domestication and Conversion. The Revised Act provides enhanced flexibility for domesticating, merging, and converting an entity other than a domestic LLC, if permitted by the law under which it was formed.
     

What Does CohnReznick Think?
The new changes introduced by the Revised Act present an especially opportune time, particularly for smaller companies, to review your LLC operating agreement and ensure full compliance. For assistance addressing the new provisions and understanding how any financial and tax implications will impact your company, please contact your CohnReznick professional advisor.

Contact

For more information, please contact Richard Puzo, Partner and Law Firm Industry Practice Leader, at 973-364-6675, or Rocco Marotti, Senior Manager, at 732-380-8676.

For more information about CohnReznick’s Law Firm Industry Practice, visit our webpage.


This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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