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Revised LLC Act Adopted
The Legislature has enacted P.L. 2012, c. 50, the Revised Uniform Limited Liability Company Act [“RULLCA”], to be codified as N.J.S.A. 42:2C­1 et seq. It replaces the existing statutory scheme governing limited liability companies [“LLCs”], known as the New Jersey Limited Liability Company Act [“NJLLCA”], N.J.S.A. 42:2B-1 et seq., which took effect in January of 1994. The new law, RULLCA, repeals NJLLCA (as explained below), and replaces it with a more modern regulatory scheme for the creation and operation of limited liability companies in this state.
As noted in the bill statement, the LLC is a relatively new form of unincorporated business organization that provides corporate-style limited liability to its owners, while affording the owners the partnership-like capacity to structure the entity by agreement rather than as pre- scribed by statute. LLCs began to be widely used after their favorable tax status was recognized by the Internal Revenue Service. (Under IRS Revenue Ruling 88-76, if an LLC elects to be taxed as a partnership, it does not pay federal income tax on its profits. Rather, its members are taxed on their respective shares of the LLC’s income.) As a result, LLCs have become the business entity form of choice for new businesses, and far more New Jersey LLCs have been formed in recent years than corporations and limited partnerships combined.
RULLCA was developed by the National Conference of Commissioners on Uniform State Laws [“NCCUSL”], and represents a significant advancement in this area of the law. It is a comprehensive, fully integrated “second generation” LLC statute that takes into account the best elements of “first generation” LLC statutes (such as NJLLCA) and two decades of legal developments in the field. Some of the more significant changes and innovations in RULLCA (as compared to NJLLCA) are:
?Perpetual duration; purpose. RULLCA eliminates the default (and often overlooked) rule that LLCs have a limited life. As is the case with corporations, RULLCA provides for LLCs to have perpetual duration. An LLC may be formed for “any lawful purpose” (whether or not for profit) and has the “power to do all things necessary or convenient to carry on its activities. N.J.S.A. 42:2C-4; -5.
?Permissible form of operating agreement; management. RULLCA requires an LLC to have a operating agreement, but permits it to be oral, written or implied, based on the way an LLC has operated. N.J.S.A. 42:2C-2; -11 et seq. This is consistent with the vast majority of states and in line with the organization of many LLCs formed in New Jersey. RULLCA provides that each LLC will be “member-managed”, unless the operating agreement provides that it will be “manager-managed”. N.J.S.A. 42:2C-37.
?Statement of authority. RULLCA allows an LLC to file a statement of authority with the Division of Revenue in the Department of the Treasury (and, in the case of real estate, in the land records) authorizing certain people or entities to bind the LLC. N.J.S.A. 42:2C­28.
?Merger; domestication; conversion. RU- LLCA provides streamlined methods for merger, domestication (e.g., allowing an LLC formed under the laws of another state to become a New Jersey LLC) and conversion (e.g., allowing a corporation to become an LLC). N.J.S.A. 42:2C-73 et seq.
?Effective Date; Applicability. RULLCA was enacted on Sept. 19, 2012, and becomes effective 180 days thereafter, or ca. March 18, 2013. It will initially govern all LLCs formed after that date. However, as of March, 2014, it will apply to all New Jersey LLCs, regardless of whether formed under the old (NJLLCA) or new (RULLCA) statutes.
Despite the changes wrought by RULLCA (some of which are summarized above), the adoption of the new law should have little effect on current underwriting practices. It should be noted that LLCs will still be formed by filing a certificate of formation with the Secretary of the Treasury, Division of Revenue. N.J.S.A. 42:2C-18 et seq. The name of an LLC must still contain the words “limited liability company” (or the abbreviations “L.L.C.” or “LLC”). N.J.S.A. 42:2C-8.
The requirement for an operating agreement, N.J.S.A. 42:2C-11 et seq., clarifies the corresponding provision found in NJLLCA, which does not specifically require an LLC to have one. However, it is disappointing that RULLCA permits the agreement to be either oral or written or implied, or a combination thereof. N.J.S.A. 42:2C-2 (definition).
While the statement of authority provision, N.J.S.A. 42:2C-28, is helpful, note that the wording is permissive, rather than mandatory. Furthermore, although the filing of such a document in the land records is laudable, the statute gives no specific direction to county recording officers regarding the procedure for recording these documents. See N.J.S.A. 42:1A-15 for a similar statutory provision with regard to partnerships.

Similar to corporations, LLCs which have been dissolved continue their existence, but only for the purpose of winding-up their affairs. N.J.S.A. 42:2C-48 et seq. But unlike corporations, LLCs are generally exempt from franchise taxes, and thus the most frequent cause of corporate dissolution – non­payment of the CBT – does not apply to LLCs. On the other hand, LLCs are required to file annual reports, and pay certain fees due to the government, and may be placed on the inactive list for failure to do so. (This is also referred to as administrative dissolution. If the LLC cures the deficiency, it may be reinstated, and the reinstatement “relates back” to the date it was placed on the inactive list. N.J.S.A. 42:2C-54. ) An LLC which has been placed on the inactive list may carry on only winding-up activities. N.J.S.A. 42:2C-26; -53.

Foreign LLCs must apply for a certificate of authority to do business in New Jersey. N.J.S.A. 42:2C-57 et seq. RULLCA contains a list of activities which do not constitute “doing business”, including acting as a mortgage lender or enforcing a mortgage (although the ownership of income-producing real property does constitute “doing business”). The failure to obtain a certificate of authority does not “...impair the validity of a contract or act...” of a foreign LLC. N.J.S.A. 42:2C-59; -65. It thus seems that a foreign LLC which has not obtained a certificate of authority may nevertheless validly engage in real estate transactions.

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