The New Jersey Revised Uniform Limited Liability Company Act (RULLCA) becomes effective on March 1, 2014 for every New Jersey Limited Liability Company (LLC)
Members of a New Jersey LLC should adopt a written operating agreement in order to avoid unwanted application of the default provisions under RULLCA, such as:
- All distributions (both regular distributions and liquidating distributions) must be in equal shares among members (per capita);
- The vote required in order for members to take action is either a majority or unanimous vote, depending on the matter, with one vote per member (per capita);
- Unless a written operating agreement provides otherwise, members of a member-managed LLC owe a duty of loyalty to the LLC and to the other members; and
- A member may withdraw at any time and continue to be entitled to receive distributions as a dissociated member.
A written operating agreement may be adopted by the members to address the potentially unintended application of the default provisions. For example, the written operating agreement may:
- Base distributions on the agreed value of each member’s membership interest or capital contribution to the LLC, instead of per capita;
- Tailor the voting requirements for different matters to fit the members’ needs, including requiring votes based on members’ membership interest percentages and not per capita;
- Eliminate or restrict a member’s duty of loyalty as needed; and
- Tailor the terms and conditions under which a member may withdraw from the LLC and the consequences of withdrawal.