Wednesday, October 10, 2012
A new set of laws governing
limited liability companies will become effective March 2013. New Jersey
The changes are profound. The Limited Liability Company Act fundamentally changes the manner in which limited liability companies are organized and managed.
This is one of the most significant pieces of business legislation in a number of years. Beginning in 2013, the default rules a
limited liability company are
going to be much more like partnerships and the rules for starting
and running a limited liability company are going to change
drastically. Every New Jersey
limited liability company will be affected by the changes in the law and
the principals of these businesses should begin to consider how they will
address the revisions. New Jersey
The reason why the changes are so sweeping is that the legislature scrapped the existing Limited Liability Company Act that was modeled largely on the LLC law of
of the Revised
Uniform Limited Liability Company Act (RULLCA), a model statute
prepared by Uniform Law
Most significantly, for NJECPAC members, the RULLCA is very different from what is existing now. There are so many changes we can not cover them all in one post. The changes will have to analyzed over the next few months. The new law takes effect in March 2013 for newly formed LLCs and in March 2014 for existing LLCs.
The more basic changes include the following:
Oral Operating Agreement. The new statute permits operating agreements be formed by oral agreements or conduct.
New Remedies. The new statute contains a provision that permits a forced sale of an interest in the event of oppressive behavior. But the statute goes a bit further authority the court to compel sales of interests when necessary in the interests of equity.
Revised Duties Among Members. Limited liability companies members were free to structure the rights and obligations of the members as they saw fit. The new law expressly defines the members duties and restricts the ability of the LLC to limit those duties by contract.
Distributions. The default rule for distributions is per capita under the new law, as opposed to distributions based on the amount of capital contributed under the present law.
The Uniform Limited Liability Company Act has not been widely accepted. Of the major "commercial states," it has now been adopted only in
California, Illinois and . For
businesses operating as LLCs, it is a new world with new rules. Learn More Here New Jersey