How to Form an LLC in New Jersey!

Forming an LLC in New Jersey can provide a number of legal benefits.

Freedom of Contract

The New Jersey LLC Act explicitly states it should be interpreted “to give the maximum effect to the principle of freedom of contract and to the enforceability of operating agreements.”  The Act gives LLC members contractual freedom to customize their capital contributions and their shares of profits and losses.  An LLC’s members can designate a method for allocating profits and losses in an LLC Agreement that is greater or lesser than their percentage of capital contributions.  This gives members contractual flexibility to adapt their income streams and risks of loss to further their broader asset management plans.

The LLC Act enables members to create classes of membership.  An LLC agreement may establish classes of membership interests with different rights, powers, and duties, including voting and non-voting interests.  This facilitates everything from complex, high-dollar-volume transactions to succession planning in family businesses and estate planning by gifts of non-voting interests.

Privacy for Owners

The New Jersey LLC Act does not require filing of members’ names.  A person may sign an LLC’s certificate of formation, and the person does not need to be a member of the LLC.  A manager or whoever files the certificate of formation does not need to be a member or a natural person.  An LLC’s members may therefore have an entity or person who is not a member file the LLC’s certificate of formation with the New Jersey Secretary of State.

Perpetual Duration

The LLC Act provides for an LLC’s unlimited life.  It specifically states “[a] limited liability company has perpetual duration.”  An LLC’s existence can therefore outlive its members’ lifetimes.

Benefits for Business Partners

The New Jersey LLC Act gives members contractual freedom to customize the duties each party to an LLC’s operating agreement owes to the other parties.  It provides that an LLC agreement cannot “eliminate the duty of loyalty, the duty of care, or any other fiduciary duty.”  But an LLC agreement may reasonably (1) “identify specific types or categories of activities that do not violate the duty of loyalty”; (2) “alter the duty of care, except to authorize intentional misconduct or knowing violation of law”; or (3) “alter any other fiduciary duty, including eliminating particular aspects of that duty.”

In addition, an LLC agreement may “specify the method by which a specific act or transaction that would otherwise violate the duty of loyalty may be authorized or ratified by one or more disinterested and independent persons after full disclosure of all material facts.”  The result is the LLC Act gives parties to the LLC agreement power to choose the level of protection they want and the ability to take advantage of mutually beneficial opportunities.

Protections Against Unwanted Parties

The New Jersey LLC Act allows members to protect their control of the LLC.  Under the Act, if a member of a member-managed LLC either (1) becomes a debtor in bankruptcy; (2) executes an assignment for the benefit of creditors; or (3) acquiesces in the appointment of a trustee, receiver, or liquidator of the person or of all or substantially all of the person’s property then the person is dissociated from being a member in the LLC.  Dissociation terminates “the person’s right to participate as a member in the management and conduct of the company’s activities.”

Creditors Only Get Passive Rights, Not Control Rights

If a judgment creditor obtains a charging order against a member’s membership interest, it “constitutes a lien on a judgment debtor’s transferable interest and requires the limited liability company to pay over to the person to which the charging order was issued any distribution that would otherwise be paid to the judgment debtor.”  If the judgment creditor forecloses on the membership interest, the purchaser at the foreclosure sale “only obtains the transferable interest, does not thereby become a member.”  The obligations of an LLC and its members to a transferee or dissociated member are governed by the operating agreement.  These provisions are the “exclusive remedy by which a person seeking to enforce a judgment against a member or transferee may, in the capacity of judgment creditor, satisfy the judgment from the judgment debtor’s transferable interest.”  This enables members to protect their control of an LLC.

Here are the steps you will need to follow to set up a New Jersey LLC.

Step 1. Choose a Name 

Every New Jersey LLC’s name needs to contain “limited liability company,” “LLC,” or “L.L.C.” It also must be differentiable from the name of any business entity that has either been formed or qualified to do business in New Jersey.  Additionally, the name cannot contain the words “banking,” “little league,” “realtor,” “cemetery,” “Olympia,” “Olympic,” “trust” or “insurance.”

Step 2. Appoint a Registered Agent in New Jersey

A New Jersey LLC must continuously maintain a New Jersey registered address.  A commercial registered agent service may act as a New Jersey registered agent and office.

Step 3. File a Certificate of Formation

To become an official business entity, an authorized person needs to file the LLC’s Certificate of Formation with the Secretary of State. This must include the name of the LLC, the name and address of the Registered Agent, whether the LLC is perpetual or has a date of dissolution, and any other provisions the organizer decides to include. The Certificate of Formation also requires a $125 filing fee.

Step 4. Prepare an Operating Agreement

New Jersey currently defines an operating agreement as a “written, verbal or oral” agreement for multi-member LLCs. This document will govern the internal relationships and actions of the LLC. For recommendations on operating agreements, visit our operating agreement page.

There are some additional steps you will need to take after you form your New Hampshire to finish setting up and maintaining your business.

Get an EIN Number

Multi-member LLCs, or those that employ anybody, will need to get an EIN from the I.R.S. This can be done directly, or an incorporation service like Incnow can do it for you.

File Annual Reports

Every New Jersey LLC must file an annual report with the Secretary of State. This must contain the name of the company, the name and address of the registered agent, and the names and addresses of managers or managing members. This must be accompanied by a $50 fee sent to the State Treasurer.