Multi-Member LLC Operating Agreement — New Jersey

Multi-Member LLC Operating Agreement (NEW JERSEY)

Quick-Reference Summary

Article I — Formation

1.1 Formation. The organizers have caused a Certificate of Formation to be filed with the New Jersey Department of the Treasury, Division of Revenue and Enterprise Services, on [__/__/____], pursuant to N.J.S.A. 42:2C-18, forming [________________________________] (the "Company") as a domestic limited liability company.

1.2 Name. The name of the Company is [________________________________].

1.3 Principal Office. The principal office of the Company is located at:
[________________________________]
[________________________________]

1.4 Registered Agent. The registered agent for service of process in New Jersey is:
Name: [________________________________]
Address: [________________________________]

1.5 Term. The Company shall have perpetual duration unless dissolved under Article XIV or by operation of law.

1.6 Governing Law. This Agreement and the internal affairs of the Company are governed by the laws of the State of New Jersey, including RULLCA, N.J.S.A. 42:2C-1 et seq., without regard to conflict-of-laws principles.

Article II — Purpose and Powers

2.1 Purpose. The Company is organized for any lawful purpose for which a limited liability company may be organized under N.J.S.A. 42:2C-4, including but not limited to: [________________________________].

2.2 Powers. The Company shall have all powers granted to a New Jersey limited liability company under N.J.S.A. 42:2C-5, including the power to sue and be sued, contract, acquire and dispose of property, borrow money, issue debt, and conduct business inside and outside New Jersey.

Article III — Members and Membership Interests

3.1 Members. The Members of the Company, their initial capital contributions, and their Percentage Interests as of the Effective Date are:

3.2 Membership Interest. A "Membership Interest" consists of (a) the Member's economic rights (transferable interest under N.J.S.A. 42:2C-41) and (b) the Member's governance rights, including the right to vote and to participate in management.

3.3 Admission of Additional Members. A new Member may be admitted only with the written consent of Members holding at least [____]% of the Percentage Interests, and upon execution of a counterpart of this Agreement.

3.4 No Personal Liability. Consistent with N.J.S.A. 42:2C-30, the debts, obligations, and other liabilities of the Company, whether arising in contract, tort, or otherwise, are solely the debts, obligations, and liabilities of the Company. No Member is personally liable, directly or indirectly, for any such debt, obligation, or liability solely by reason of being a Member.

3.5 Separateness Covenants. To preserve the liability shield, the Members shall cause the Company to:

• ☐ Maintain Company bank accounts separate from personal accounts;
• ☐ Keep Company books and records separate from personal records;
• ☐ Not commingle Company assets with personal assets of any Member;
• ☐ Hold the Company out to the public as a separate legal entity;
• ☐ Document loans, distributions, and intercompany transactions in writing;
• ☐ Maintain adequate capitalization for the Company's foreseeable operations.

Article IV — Capital Contributions and Capital Accounts

4.1 Initial Contributions. Each Member has contributed (or shall contribute by [__/__/____]) the cash or property described in Section 3.1 and Schedule A.

4.2 Capital Accounts. A separate capital account shall be maintained for each Member in accordance with U.S. Treasury Regulation § 1.704-1(b)(2)(iv). Each Member's capital account shall be (a) increased by additional contributions and allocated profits, and (b) decreased by distributions and allocated losses.

4.3 No Interest on Capital. No Member is entitled to interest on the Member's capital contribution or capital account balance.

4.4 No Withdrawal of Capital. No Member may withdraw any portion of the Member's capital contribution or capital account balance except as expressly provided in this Agreement.

4.5 Loans by Members. Any loan by a Member to the Company shall be evidenced by a written promissory note, bear interest at a rate not less than the applicable federal rate, and shall not be treated as a capital contribution.

Article V — Capital Calls

5.1 Additional Capital. No Member is obligated to make additional capital contributions except as provided in this Article V.

5.2 Mandatory Capital Calls. The [Members / Managers] may issue a written capital call to all Members in proportion to Percentage Interests upon a determination that additional capital is necessary for Company operations. A capital call requires the affirmative vote of Members holding at least [____]% of the Percentage Interests.

5.3 Notice. A capital call notice shall state the aggregate amount, each Member's pro rata share, the purpose, and the funding deadline (not less than [30] days from notice).

5.4 Failure to Contribute. If a Member fails to fund a properly noticed capital call, the non-defaulting Members may, at their election:

• ☐ Treat the unfunded amount as a loan from the contributing Members to the defaulting Member, bearing interest at [____]% per annum;
• ☐ Dilute the defaulting Member's Percentage Interest pro rata to the unfunded shortfall (recalculated under a formula to be set forth on Schedule B);
• ☐ Purchase the defaulting Member's Membership Interest at a discount of [____]% to fair value as determined under Article XI.

Article VI — Allocations and Distributions

6.1 Allocations. Items of Company income, gain, loss, deduction, and credit shall be allocated to the Members in proportion to Percentage Interests, subject to compliance with the substantial economic effect rules of Treasury Regulation § 1.704-1(b)(2) and the qualified income offset, minimum gain chargeback, and other regulatory allocations set forth in Schedule C.

6.2 Distributions. Distributions shall be made to the Members in proportion to Percentage Interests at such times and in such amounts as the [Members / Managers] determine, subject to the limitations of N.J.S.A. 42:2C-35.

6.3 Tax Distributions. Within [30] days after the close of each fiscal quarter, the Company shall distribute to each Member an amount equal to such Member's allocable share of taxable income multiplied by the Assumed Tax Rate ([____]%), to the extent of available cash and subject to N.J.S.A. 42:2C-35.

6.4 Limitations on Distributions. No distribution shall be made if, after giving effect to the distribution, the Company would be unable to pay its debts as they become due in the ordinary course of business, or total Company assets would be less than total Company liabilities. N.J.S.A. 42:2C-35.

6.5 Liability for Improper Distributions. A Member who receives a distribution in violation of N.J.S.A. 42:2C-35 is liable to the Company for the amount of the distribution to the extent provided in N.J.S.A. 42:2C-36.

6.6 Tax Status. The Company shall be taxed as a partnership under Subchapter K of the Internal Revenue Code unless and until the Members unanimously elect otherwise on IRS Form 8832 or Form 2553.

Article VII — Management

7.1 Management Structure. The Company shall be (check one):

• ☐ Member-managed pursuant to N.J.S.A. 42:2C-37(b); or
• ☐ Manager-managed pursuant to N.J.S.A. 42:2C-37(c). The initial Managers are: [________________________________].

7.2 Authority of [Members / Managers]. Subject to Section 7.3, the [Members / Managers] have full authority to manage the business and affairs of the Company, including the power to enter into contracts, hire and terminate employees, borrow money, acquire and dispose of property, and bring or defend litigation.

7.3 Major Decisions. Notwithstanding Section 7.2, the following actions require the affirmative vote of Members holding at least [____]% of the Percentage Interests:

• Amendment of the Certificate of Formation or this Agreement;
• Admission of a new Member or issuance of additional Membership Interests;
• Sale, lease, exchange, or other disposition of all or substantially all of the Company's assets;
• Merger, conversion, domestication, or dissolution of the Company;
• Incurring indebtedness in excess of $ [____] in a single transaction or $ [____] in the aggregate;
• Capital expenditures in excess of $ [____];
• Change in the nature of the Company's business;
• Filing of a voluntary bankruptcy petition;
• Election of corporate tax classification.

7.4 Removal of Manager. A Manager may be removed, with or without cause, by the affirmative vote of Members holding at least [____]% of the Percentage Interests.

7.5 Officers (Optional). The Members or Managers may appoint officers (e.g., President, CEO, CFO, Secretary) to act on behalf of the Company. Any such appointment may be revoked at any time.

7.6 Statement of Authority. The Company may file a Statement of Authority under N.J.S.A. 42:2C-28 to publicly identify persons authorized to transfer real property or enter into specified transactions.

Article VIII — Voting Rights and Member Meetings

8.1 Voting. Except as otherwise provided in this Agreement, each Member shall vote in proportion to Percentage Interest. This Section 8.1 supersedes the per-capita default of N.J.S.A. 42:2C-37(b)(3).

8.2 Meetings. Regular meetings of the Members shall be held at least annually. Special meetings may be called by any [Member / Manager] on not less than [10] days' written notice.

8.3 Quorum. A quorum consists of Members holding a majority of the Percentage Interests, present in person or by proxy.

8.4 Action Without a Meeting. Any action that may be taken at a meeting may be taken by written consent signed by Members holding the Percentage Interests required to approve the action at a meeting.

8.5 Remote Participation. Members may participate in any meeting by telephone or video conference, provided all participants can hear one another.

Article IX — Fiduciary Duties and Standards of Conduct

9.1 Statutory Standards. Each Member of a member-managed Company, and each Manager of a manager-managed Company, owes the Company and the other Members the duties of loyalty and care set forth in N.J.S.A. 42:2C-39 and the contractual obligation of good faith and fair dealing.

9.2 Duty of Loyalty. The duty of loyalty includes:

• Accounting to the Company for any property, profit, or benefit derived from the Company's activities, use of Company property, or appropriation of a Company opportunity;
• Refraining from dealing with the Company as, or on behalf of, a party having an interest adverse to the Company;
• Refraining from competing with the Company.

9.3 Permitted Modifications. Pursuant to N.J.S.A. 42:2C-11(d), this Agreement may not:

• Eliminate the duty of loyalty, the duty of care, or any other fiduciary duty (but may identify specific types or categories of activities that do not violate the duty of loyalty, if not manifestly unreasonable);
• Eliminate the contractual obligation of good faith and fair dealing (but may prescribe the standards by which the performance is to be measured, if not manifestly unreasonable);
• Restrict rights of third parties.

9.4 Authorized Conflicts. Subject to Section 9.3, the Members hereby authorize the following activities, which shall not constitute a breach of the duty of loyalty: [________________________________].

9.5 Indemnification. To the fullest extent permitted by N.J.S.A. 42:2C-38, the Company shall indemnify and hold harmless each Member, Manager, and officer from and against any liability incurred in connection with Company business, except for breaches of the duties expressly preserved by N.J.S.A. 42:2C-11(d).

Article X — Transfer Restrictions, ROFR, Tag-Along, Drag-Along

10.1 General Restriction. No Member may sell, assign, pledge, encumber, or otherwise transfer all or any portion of the Member's Membership Interest except in compliance with this Article X. Any purported transfer in violation of this Article X is void.

10.2 Permitted Transfers. A Member may transfer the Member's Membership Interest, without compliance with Sections 10.3–10.5, to (a) a revocable trust for the Member's benefit, (b) a family member or family entity for estate-planning purposes, or (c) another existing Member, subject in each case to the transferee executing a counterpart of this Agreement.

10.3 Right of First Refusal. Before transferring any Membership Interest to a third party, the selling Member shall deliver to the Company and the other Members a written notice specifying the proposed transferee, price, and terms. The Company shall have [30] days, and the non-selling Members shall have an additional [30] days, to elect to purchase the offered interest on the same terms.

10.4 Tag-Along. If Members holding more than [50]% of the Percentage Interests propose to sell their Membership Interests to a third party, each other Member shall have the right to participate in the sale on the same terms, in proportion to Percentage Interests.

10.5 Drag-Along. If Members holding at least [____]% of the Percentage Interests approve a sale of the Company (whether by sale of interests, merger, or sale of substantially all assets) to a bona fide third party, all other Members shall be required to participate in the transaction on the same terms.

10.6 Effect of Transfer. A transferee of only economic rights (a "Transferee") acquires only the transferable interest under N.J.S.A. 42:2C-41 and is not admitted as a Member unless all Members consent in writing.

Article XI — Buy-Sell Provisions

11.1 Triggering Events. Upon the occurrence of any of the following with respect to a Member (a "Departing Member"), the Company shall have the option (and, in the case of (c) and (d), the obligation) to purchase the Departing Member's Membership Interest:

• (a) Voluntary withdrawal or attempted dissociation;
• (b) Termination of employment with the Company (if Member is employed by Company);
• (c) Death;
• (d) Adjudicated incapacity;
• (e) Bankruptcy or insolvency;
• (f) Divorce, if a court would otherwise award all or part of the Membership Interest to a non-Member spouse;
• (g) Material breach of this Agreement.

11.2 Purchase Price. The purchase price shall be the fair market value of the Departing Member's Membership Interest as determined by:

• ☐ Annual valuation by the Members (Schedule D, updated annually);
• ☐ Appraisal by a qualified appraiser mutually selected; or
• ☐ Formula: [____] × [trailing 12-month EBITDA] − net debt, multiplied by the Departing Member's Percentage Interest.

11.3 Discounts. The purchase price may be adjusted by minority and marketability discounts as set forth in Schedule D, except that no discount shall apply to a purchase triggered by death or incapacity.

11.4 Payment Terms. The purchase price shall be paid (a) [____]% at closing in cash and (b) the balance over [____] years pursuant to a promissory note bearing interest at the applicable federal rate, with quarterly installments and a right of prepayment without penalty.

11.5 Life Insurance Funding. The Company may, but is not required to, fund the buy-sell obligation through cross-purchase or entity-purchase life insurance on each Member. See Schedule E.

Article XII — Charging Order

12.1 Transferable Interest. A Member's transferable interest is personal property, consisting only of the right to receive distributions, as set forth in N.J.S.A. 42:2C-41.

12.2 Charging Order — Exclusive Remedy. Pursuant to N.J.S.A. 42:2C-43, the exclusive remedy by which a judgment creditor of a Member (or a Transferee) may satisfy a judgment from the Member's transferable interest is a charging order entered by a court of competent jurisdiction. A charging order constitutes a lien on the judgment debtor's transferable interest and entitles the judgment creditor only to distributions that would otherwise be paid to the judgment debtor.

12.3 No Foreclosure of Membership Rights. No creditor of a Member shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the Company. A charging order does not entitle the creditor to participate in management, inspect books and records, or compel distributions.

12.4 No Forced Dissolution. A charging order is not, and shall not be construed as, an event of dissolution of the Company.

Article XIII — Deadlock and Dispute Resolution

13.1 Deadlock Defined. A "Deadlock" occurs if the Members or Managers are unable to reach the requisite vote on a Major Decision after two consecutive properly noticed meetings held not less than [30] days apart.

13.2 Mediation. Upon a Deadlock or any dispute under this Agreement, the disputing parties shall first submit the matter to non-binding mediation in [County], New Jersey, before a mediator mutually selected (or, if no agreement, appointed by JAMS or the American Arbitration Association).

13.3 Arbitration. If mediation does not resolve the dispute within [60] days, the dispute shall be submitted to binding arbitration in [County], New Jersey, before a single arbitrator under the AAA Commercial Rules. Judgment on the award may be entered in any court of competent jurisdiction.

13.4 Buy-Sell on Deadlock ("Texas Shoot-Out"). Alternatively, any Member may, in the event of a Deadlock not resolved within [90] days, deliver a written offer specifying a price per 1% of Percentage Interest at which the offering Member is willing either to buy the other Members' Interests or to sell the offering Member's own Interest. The recipients shall, within [30] days, elect to buy or to sell at the stated price.

13.5 Judicial Dissolution. Notwithstanding the foregoing, any Member may seek judicial dissolution under N.J.S.A. 42:2C-48 on the grounds that (a) it is not reasonably practicable to carry on the Company's activities in conformity with the Certificate of Formation and this Agreement, or (b) the Managers or controlling Members have acted in a manner that is illegal, fraudulent, or oppressive and directly harmful to the applicant. The court may order alternative remedies including a buyout, appointment of a custodian, or a provisional manager.

Article XIV — Dissolution and Winding Up

14.1 Events of Dissolution. The Company shall be dissolved upon the first to occur of:

• (a) An event of dissolution specified in this Agreement;
• (b) The consent of all Members;
• (c) The passage of 90 consecutive days during which the Company has no Members;
• (d) Entry of a judicial decree of dissolution under N.J.S.A. 42:2C-48; or
• (e) Filing of a certificate of dissolution.

14.2 Effect of Dissociation. Pursuant to N.J.S.A. 42:2C-46 and 42:2C-47, dissociation of a Member does not, by itself, dissolve the Company. A dissociated Member's interest is treated as that of a Transferee and is subject to the buy-sell provisions of Article XI.

14.3 Winding Up. Upon dissolution, the Company shall wind up its affairs pursuant to N.J.S.A. 42:2C-49 and distribute its remaining assets in accordance with N.J.S.A. 42:2C-56:

• First, to creditors (including Members who are creditors);
• Then, to Members in satisfaction of liabilities for unpaid distributions;
• Then, to Members for the return of contributions; and
• Then, to Members in proportion to Percentage Interests.

14.4 Certificate of Cancellation. Upon completion of winding up, the [Members / Managers] shall cause a Certificate of Cancellation to be filed with the New Jersey Division of Revenue.

Article XV — State-Specific Provisions

15.1 Annual Report. Pursuant to N.J.S.A. 42:2C-26, the Company shall file an Annual Report with the New Jersey Division of Revenue and Enterprise Services by the last day of the anniversary month of formation and shall pay the then-current filing fee (currently $75).

15.2 Business Registration. The Company shall obtain and maintain a Business Registration Certificate from the New Jersey Division of Revenue (NJ Form NJ-REG) and shall comply with all New Jersey tax registration, sales tax, and employer withholding obligations as applicable.

15.3 No Series LLC. New Jersey RULLCA does not authorize the formation of series limited liability companies. The Members shall not designate or hold out any internal "series" of the Company as having a separate liability shield under New Jersey law.

15.4 No Publication Requirement. New Jersey does not impose a newspaper publication requirement for formation of an LLC.

15.5 Partnership Tax Filing. The Company, as a multi-member LLC taxed as a partnership, shall file Form NJ-1065 annually and pay the New Jersey partnership filing fee of $150 per partner (up to a $250,000 cap) and any applicable nonresident partner withholding tax.

15.6 Sales and Use Tax. If applicable, the Company shall register for and collect New Jersey sales and use tax.

15.7 Statement of Authority (Optional). The Members may file a Statement of Authority under N.J.S.A. 42:2C-28 to identify persons authorized to bind the Company in transactions affecting real property or other specified matters.

Article XVI — General Provisions

16.1 Entire Agreement. This Agreement constitutes the entire operating agreement of the Company under N.J.S.A. 42:2C-11 and supersedes all prior agreements and understandings among the Members.

16.2 Amendment. This Agreement may be amended only by a written instrument signed by Members holding at least [____]% of the Percentage Interests, except that any amendment that disproportionately and adversely affects a Member's economic rights requires that Member's written consent.

16.3 Severability. If any provision of this Agreement is held invalid or unenforceable, the remaining provisions shall continue in full force and effect.

16.4 Notices. Any notice required hereunder shall be in writing and delivered by hand, certified mail, overnight courier, or email to the Member at the address listed in Section 3.1 or such other address as the Member may designate in writing.

16.5 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts and by electronic signature under the New Jersey Uniform Electronic Transactions Act, N.J.S.A. 12A:12-1 et seq.

16.6 Governing Law; Venue. This Agreement is governed by New Jersey law. Subject to Article XIII, the state and federal courts located in [County], New Jersey shall have exclusive jurisdiction.

16.7 Confidentiality. Each Member shall keep confidential all non-public Company information except as required by law or as authorized in writing by the [Members / Managers].

Signature Block

THE COMPANY:

[________________________________], a New Jersey limited liability company

By: [________________________________]
Name: [________________________________]
Title: [Member / Manager]
Date: [__/__/____]

THE MEMBERS:

Member 1:
[________________________________]
Name (print): [________________________________]
Date: [__/__/____]

Member 2:
[________________________________]
Name (print): [________________________________]
Date: [__/__/____]

Member 3:
[________________________________]
Name (print): [________________________________]
Date: [__/__/____]

State of New Jersey, County of [________________________________]

Sworn to (or affirmed) and subscribed before me on [__/__/____] by [________________________________].

Notary Public: [________________________________]
Commission Expiration: [__/__/____]

Pre-Execution Checklist

• ☐ Certificate of Formation filed with NJ Division of Revenue and Enterprise Services
• ☐ Company name verified as available through NJ Business Name Search
• ☐ Registered agent confirmed with NJ street address (not P.O. Box)
• ☐ EIN obtained from IRS (Form SS-4)
• ☐ NJ Business Registration Certificate (NJ-REG) filed
• ☐ Separate Company bank account opened with all Member authorizations
• ☐ Initial capital contributions documented and deposited
• ☐ Schedules A (contributions), B (dilution formula), C (tax allocations), D (valuation), E (insurance) completed
• ☐ Annual report calendar reminder set for anniversary month
• ☐ Operating Agreement signed by all Members, dated, and stored with corporate records
• ☐ Insurance (general liability / professional / D&O as applicable) bound
• ☐ Tax classification (partnership default vs. S-corp/C-corp election) decided with CPA
• ☐ Buy-sell funding source (cash reserves vs. insurance) selected
• ☐ Form NJ-1065 partnership return calendar reminder set

Sources and References

• New Jersey Revised Uniform Limited Liability Company Act, N.J.S.A. 42:2C-1 et seq.: https://law.justia.com/codes/new-jersey/2018/title-42/chapter-2c/
• N.J.S.A. 42:2C-43 (Charging order): https://law.justia.com/codes/new-jersey/2018/title-42/chapter-2c/section-42-2c-43/
• N.J.S.A. 42:2C-48 (Events causing dissolution): https://law.justia.com/codes/new-jersey/title-42/section-42-2c-48/
• NJ Division of Revenue – Annual Report: https://www.njportal.com/dor/annualreports
• NJ Business Filings (Business.NJ.gov): https://business.nj.gov/pages/filings-and-accounting
• IRS, Limited Liability Company (LLC): https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc