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On September 19, 2012, Governor Christie signed the “Revised Uniform Limited Liability Company Act,” (RULLCA) This Act will become effective on March 20, 2013 for all new limited liability companies formed after that date. For all existing limited liability companies, RULLCA will become effective 18 months following the adoption of the statute, or March 20, 2014.

The Limited Liability Company legislation (NJLLCA) was passed on January 26, 1994 and was modeled after the Delaware Limited Liability Act. LLCs became extremely popular and in 1997 when the IRS eliminated the tax classification issues, LLCs became the business entity form of choice for new businesses in New Jersey. In recent years, far more LLCs have been formed than corporations.

There had been no changes to the Act since its inception, until the present enactment of the RULLCA.

The most significant changes are:

Perpetual Duration. The present statute provides that unless an LLC has perpetual existence, it will have a limited life. RULLCA now provides that LLCs, like corporations, will have perpetual life.

Operating Agreement. Under RULLCA, there is no longer a requirement for a written Operating Agreement. It has been shown that although nearly all 50 states and the District of Columbia have enacted LLC statutes, less than a handful require the Operating Agreements be in writing. .RULLCA permits the Operating Agreements to be oral, written or implied based on the way the LLC has operated.

Profits, Losses and Distributions. Under RULLCA, the profits and losses are allocated per capita, rather than on the basis of agreed value of the contributions made by the members as existing under the NJLLCA.

Statements of Authority. Under RULLCA the LLC is allowed to file statements of authority with the Division of Revenue, Dept. of Treasury, authorizing certain people or entities to bind the LLC. In the case of real estate, statements may be filed with the clerk or register where real estate records are maintained.

Payment to Resigning Member. Upon resignation, the resigning member is dissociated as a member and has only the rights of an economic interest holder.

Remedies for Deadlock and Oppression. RULLCA permits a member to seek a court order dissolving the company on the grounds that the managers or those members in control of the company have acted or are acting in a manner that is oppressive and was, is, or will be directly harmful to the member. RULLCA also allows a member to seek a less drastic remedy, such as the appointment of a custodian

Domestication and conversion. RULLCA provides enhanced case and flexibility for domesticating, merging and converting an entity other than a domestic limited liability company, if permitted by the law under which it was formed. This offers streamlined methods in allowing foreign companies to become New Jersey LLCs and to allow a corporation to be become an LLC.

RULLCA has now been adopted in Idaho, Iowa, Nebraska, Utah, Wyoming (which is the birthplace of LLCs), the District of Columbia and California. In 2012 legislation proposing RULLCA has been introduced in Kansas and Minnesota.

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