Quick Start Guide
This Quick Start Guide is a brief overview of how to form an LLC in New Jersey.
Detailed Lessons:
1. Name Search
2. Registered Agent
3. LLC Formation
4. EIN Number
5. LLC Registration
6. Operating Agreement ← you are here
7. Annual Report
8. Licenses and Permits
9. Taxes
New Jersey LLC Costs:
New Jersey LLC formation: $125
New Jersey LLC annual report: $75 per year
Need help?
Hire a reliable service to form your New Jersey LLC:
Northwest ($39 + state fee) or LegalZoom ($149 + state fee)
★ Check out Northwest vs LegalZoom
What is a New Jersey LLC Operating Agreement?
A New Jersey LLC Operating Agreement is a written contract among the LLC Members (owners) which includes details and information about LLC ownership and management.
Basic Information:
Your Operating Agreement will include basic information about your New Jersey LLC. A lot of the information will be the same information listed in your LLC’s Certificate of Formation, such as:
- LLC Name
- LLC effective date
- New Jersey Registered Agent
- purpose of LLC
- duration of LLC
- and how the LLC will be taxed
LLC Ownership:
Your New Jersey LLC Operating Agreement will be a place where all the LLC Members will list how much of the LLC they own and then each Member will sign the Operating Agreement.
How much someone owns is called their “ownership interest”, “ownership percentage”, or “ownership units”. LLC Ownership is most often expressed as a percentage (example, 5%, 50%, 100%, etc.). The terms “shares” or “shareholders” doesn’t apply to LLCs.
Initial Capital Contribution:
One of the first things you’ll do after your LLC filing is approved by the New Jersey Division of Revenue is have each of the LLC Members (or the sole Member in a Single-Member LLC) make their initial capital contribution. The initial capital contributions will be listed in your New Jersey LLC Operating Agreement.
A capital contribution is simply an individual member depositing money into the LLC bank account. The most common way to do this is by each person writing a personal check made out to the LLC. This also creates a nice record of the transaction. If you’re going to use an Operating Agreement template provided below, you’ll want the amount of the initial capital contribution to be proportionate to the ownership percentages.
For example, if it’s a 2-Member LLC with 50/50 ownership, each person should deposit the same amount of money. It doesn’t matter if both Members deposit $500 or $25,000; as long as both amounts are the same. If the 2 Member LLC was owned 70/30, then the deposits should reflect that ratio, such as Member 1 depositing $7,000 and Member 2 depositing $3,000.
Distribution of Profits:
As per the Operating Agreement templates below, when Members take money out of the New Jersey LLC’s bank account and distribute profits to themselves, this is called a “capital distribution”.
A capital distribution can be taken by an LLC Member writing a check from the LLC bank account to the LLC Member(s) individually. You could also use a digital bank transfer, bank wire, or any other other means of money transfer that creates a documented record.
In a Multi-Member New Jersey LLC, the amount of the capital distributions are proportionate to the percentage of LLC ownership.
Statement about taxes:
A brief statement of how the LLC will be taxed will be made in the New Jersey LLC’s Operating Agreement.
This will be the same type of taxation that was chosen when you got an EIN for your New Jersey LLC in the prior lesson.
Membership Voting:
The rules of membership voting will be spelled out in your New Jersey LLC’s Operating Agreement. If you use the template for a Member-Managed LLC below, the voting powers are proportionate to the LLC ownership percentages.
If you use the Manager-Managed Operating Agreement template below, the voting powers are also proportionate to the LLC ownership percentages. Then the Members (by a majority vote) agree to elect a Manager. The Manager then has their own authority to make most decisions on behalf of the LLC (without a vote needed by the Members). However, certain things, like adding a new LLC Member require a vote of the existing Members (and the Manager has no say).
What about Single-Member LLCs?
Operating Agreements are not only for Multi-Member LLCs.
Even if you are the only Member of your New Jersey LLC (a Single-Member LLC), it’s still best practice to have an Operating Agreement.
In case you have to go to court over a lawsuit, having an Operating Agreement will help prove your Single-Member LLC is being run as a separate entity. And therefore, your personal assets remain safe and out of reach of creditors.
Do I have to send my New Jersey LLC Operating Agreement to the state?
No, you don’t have to send your New Jersey LLC Operating Agreement to the Division of Revenue (or to any other government agency for that matter).
As an “Internal Document”, you (and your fellow Members, if applicable) need only keep your New Jersey LLC Operating Agreement in your business records and amongst yourselves.
Who needs your Operating Agreement?
The following may need to see a copy of your New Jersey LLC Operating Agreement:
- Banks and lending companies
- Title companies
- Accountants, tax professionals, and lawyers
- Investors
- Court (if you ever end up there)
This list is not exhaustive. Other individuals and companies may also request a copy of your New Jersey LLC’s Operating Agreement.
Operating Agreements don’t need to be notarized
Your New Jersey LLC Operating Agreement doesn’t need to be notarized.
Once you (and the other LLC Members, if applicable) sign the Operating Agreement, then it becomes a legally binding document for all of you.
New Jersey LLC Operating Agreement (Member-managed)
A Member-managed New Jersey LLC is where all the owners (LLC Members) have the ability to bind the LLC in contracts and agreements. And the New Jersey LLC Members also run the business and the day-to-day operations.
Note: Most people choose to have their New Jersey LLC be Member-managed.
New Jersey LLC Operating Agreement (Manager-managed)
If your New Jersey LLC will be Manager-managed, you can download the Operating Agreement below, courtesy of Northwest Registered Agent.
A Manager-managed New Jersey LLC is where only one, or a few designated people (called “Managers”), have the ability to bind the LLC in contracts and agreements. The New Jersey LLC Managers also run the business and the day-to-day operations, while the other Members can’t bind the LLC in contracts and agreements, and they don’t take part in running the business and day-to-day operations. Instead, they take a passive/investor role. The Members however do vote the Manager into their position and also are required to vote on certain items, like adding or removing an LLC Member.
For more information, please see Member-managed LLC vs Manager-managed LLC.
Customized New Jersey LLC Operating Agreement
If you want your New Jersey LLC’s Operating Agreement customized to you and the other LLC Members’ specifications, we recommend hiring a business attorney.
Make sure all LLC Members have a copy
Once you finalize your New Jersey LLC’s Operating Agreement, make sure all Members have a copy.
And keep a copy or two of the Operating Agreement with your business records.
Next Step
After you’ve completed and signed your New Jersey LLC’s Operating Agreement, you can then proceed to the next Lesson: New Jersey LLC Annual Report.
References
Guide to doing business in New Jersey
New Jersey LLC Act: Sections 42-2C-11, 42-2C-12, and 42-2C-13
You are amazing for making available to anyone! Very helpful.
Many, many thanks!!
Thank you Chad! You’re very welcome :)
Hi, please let me know if a non-resident or foreigner can be a partner/member in LLC in New Jersey. Is there any restriction, if yes please do refer me a relevant law.
Regards
Hi Zahida, yes, non-US residents can own New Jersey LLCs. Here is some other helpful info:
Is a husband and wife LLC in NJ consider a single member Or partnership? Please help to find the resource to confirm this. Thanks!
Hi Kim, at the state-level, it is a Multi-Member LLC. For tax purposes, your Multi-Member LLC is taxed as a Partnership. This is because New Jersey is not a community property state. We cover this in more detail here: Qualified Joint Venture LLC.