New Jersey Limited Liability Company Act: Formation to Dissolution

The New Jersey Limited Liability Company Act, codified at N.J.S.A. 42:2C-1 through 42:2C-94, is the state statute that governs how an LLC is formed, operated, and dissolved in New Jersey. It sets a filing procedure with the Division of Revenue and Enterprise Services, imposes an annual report obligation, defines what members and managers owe the company and each other, and supplies default rules for voting, profits, and dissolution that apply whenever the operating agreement is silent. If you run an LLC in New Jersey or plan to form one, the Act is the baseline you’re operating under whether you’ve read it or not.

Forming an LLC Under the Act

An LLC comes into existence when a Certificate of Formation is filed with the Division of Revenue and Enterprise Services. The certificate must state the company’s name and the street address of a registered office in New Jersey, along with the name of a registered agent at that address who can accept legal papers.¹ The name has to include “Limited Liability Company” or an accepted abbreviation such as “LLC” or “L.L.C.,” and it has to be distinguishable from every other entity already on file.²

The filing fee is $125.³ The LLC legally exists once the certificate is filed and it has at least one member, unless the certificate names a later effective date.¹

After that, the state expects an annual report every year with a $75 fee, due by the last day of the anniversary month of formation.⁴ No reminder is sent. Missing the report in two consecutive years can trigger administrative action, placing the LLC on the state’s inactive list and limiting it to winding-up activities until it fixes the deficiency or applies for reinstatement.⁵

Why the Operating Agreement Does Most of the Work

New Jersey does not require a written operating agreement. But the Act treats the operating agreement, whether written, oral, or implied, as the document that governs member relationships, manager duties, company activities, and its own amendment process. Where the agreement is silent, the Act’s default rules fill in.⁶

Most of those defaults are customizable, but a few are not. The operating agreement cannot eliminate fiduciary duties, cannot strip out the obligation of good faith and fair dealing, and cannot unreasonably restrict a member’s right to company information. It also cannot override a court’s authority to order judicial dissolution or bypass the requirement to wind up after dissolution.⁶ Fiduciary duties can be reshaped or narrowed, but only if the changes are not “manifestly unreasonable.”

Within those limits, the agreement can set profit-sharing percentages, define acceptable conflicts of interest, set voting thresholds for different categories of decisions, require arbitration for disputes, and lay out how new members are admitted or existing interests are transferred. The reason to bother: some of the Act’s defaults are unlikely to match what the members actually want, and one in particular tends to catch people off guard (more on that below).

Who Manages the Company

Every New Jersey LLC is member-managed by default. That only changes if the operating agreement expressly says the company is “manager-managed” or uses similar language.⁷

In a member-managed LLC, each member has equal rights in running the business regardless of how much they contributed. Ordinary business decisions are decided by majority vote. Anything outside the ordinary course of business, such as selling substantially all of the company’s assets, requires unanimous consent. Amending the operating agreement also requires unanimity.⁷

In a manager-managed LLC, one or more managers handle day-to-day decisions. Managers don’t have to be members. A majority of members can appoint or remove a manager at any time, without cause. Non-managing members give up operational control but keep veto power over major moves: selling all or substantially all of the property, mergers or conversions, and any other act outside the ordinary course of business still require unanimous member consent.⁷

Fiduciary Duties Members and Managers Owe

In a member-managed LLC, every member owes the company and the other members the duties of loyalty and care. In a manager-managed LLC, those duties shift to the managers.⁸

Loyalty means accounting to the company for any profit or benefit derived from company activities or property, avoiding transactions with an interest adverse to the company, and not competing with the company before it dissolves. The duty of care is narrower than most people assume: it prohibits grossly negligent or reckless conduct, intentional misconduct, and knowing violations of law. Ordinary bad judgment, without more, doesn’t breach it.⁸ The operating agreement can restrict or reshape both duties, but it cannot eliminate them, and the obligation of good faith and fair dealing always applies.

Information Rights

Members of a member-managed LLC can inspect and copy company records, including financial statements, contracts, and tax returns, during regular business hours with reasonable notice. The company also has an affirmative duty to share information material to a member’s rights and obligations, without waiting for a demand. Each member owes the same duty to the others.⁹

In a manager-managed LLC, information access is narrower. A member has to make a written demand describing what they want and why, and the request must serve a purpose material to their interest as a member. The company has 10 days to respond, either producing the information or explaining the refusal.⁹ The operating agreement can adjust these rights but cannot unreasonably restrict them.

Contributions and the Distribution Default

Members can contribute almost anything of value: cash, tangible or intangible property, services already performed, promissory notes, or a binding commitment to contribute in the future.¹⁰ A person can even be admitted as a member without contributing anything at all.

Now the default that surprises people. When the operating agreement doesn’t address distributions, the Act splits them equally among all members and dissociated members. Not in proportion to contributions.¹¹ A member who put in $500,000 gets the same share as one who put in $50,000 unless the operating agreement rewrites the rule. This is the single strongest reason to have a written agreement in place before anyone contributes money.

The Act also protects creditors. An LLC cannot make a distribution if, afterward, it would be unable to pay its debts as they come due or its total liabilities would exceed its total assets.¹² A member who accepts a distribution knowing it violated those limits can be personally liable to return it. And membership by itself doesn’t entitle anyone to a salary; compensation requires a separate employment arrangement or an operating agreement provision.

Keeping the Liability Shield Intact

The liability shield is the point of the whole structure. Members are generally not personally responsible for company debts. But New Jersey courts can pierce the veil and reach personal assets when the LLC form has been abused. The main factors courts weigh:

Commingling funds. Running personal expenses through the company account, or personal income into it, is the most common factor in successful veil-piercing claims. A dedicated business bank account is not optional.
Undercapitalization. If the LLC was funded so thinly that it could never realistically meet its obligations, courts may treat it as the owner’s alter ego rather than a genuine business.
Ignoring formalities. Poor recordkeeping, skipped annual reports, and general failure to treat the company as separate weaken the argument that it is a separate entity.
Fraud or injustice. When the LLC form is used to deceive creditors or evade the law, courts will disregard it.

The practical takeaway is straightforward: keep business money separate from personal money, keep basic records, file the annual report every year, and fund the company adequately for what it actually does.

When a Member Leaves

Dissociation is the Act’s term for a person ceasing to be a member. It does not automatically dissolve the LLC. The company can keep going, but the dissociated person loses governance and voting rights and keeps only their economic interest, meaning the right to receive distributions they were already entitled to.

The events that cause dissociation include:

Voluntary withdrawal. A member notifies the company of intent to leave. Dissociation happens on the stated future date, or on receipt of notice if none is specified.
Operating agreement triggers. The agreement can define events like retirement, failure to meet a capital call, or competition with the company that automatically dissociate a member.
Expulsion by members. The remaining members can unanimously vote to expel someone if it is unlawful to continue with that person as a member, or if the person has transferred their entire economic interest.
Judicial expulsion. On the company’s application, a court can expel a member for wrongful conduct that materially harms the company, persistent breach of the operating agreement, or behavior that makes it impracticable to continue.
Death, incapacity, or bankruptcy. An individual member’s death dissociates them automatically. So does the appointment of a guardian, a judicial finding of incapacity, or, in a member-managed LLC, becoming a debtor in bankruptcy.¹³

The operating agreement should say what happens to the dissociated member’s economic interest, whether the company buys it back, other members can purchase it, or it stays as a passive entitlement. Without those provisions, valuation and payout disputes are common.

How the LLC Ends

Dissolution is triggered by the events listed in N.J.S.A. 42:2C-48: member consent as provided in the operating agreement, expiration of any stated duration, and judicial order.¹⁴

A court can dissolve the LLC on a member’s application in two situations. First, if the company’s activities are unlawful or it is no longer reasonably practicable to operate in conformity with the certificate of formation and the operating agreement. Second, if the managers or controlling members have acted illegally, fraudulently, or oppressively in a way that directly harms the applicant.¹⁴ The operating agreement cannot override the court’s power in either situation.

After dissolution, the LLC winds up: it stops taking new business, settles debts, and distributes what remains. The statutory order is fixed. Creditors get paid first, including any members who are also creditors. Any surplus then goes to return each member’s unreturned capital contributions. Whatever is left is split in equal shares among members and dissociated members.¹⁵ If the surplus is not enough to repay all unreturned contributions in full, it is divided proportionally by contribution value.

The final step is filing a Certificate of Cancellation with the Division of Revenue. The fee is $100 for a domestic LLC.³ Skipping it leaves the company on the state’s rolls and can keep generating annual report obligations and fees even after operations have stopped.

What the Act Doesn’t Cover

Two things owners commonly assume are part of the New Jersey Act but aren’t. Federal tax classification of the LLC is set by IRS rules, not the state statute. A single-member LLC is treated as a disregarded entity by default, and a multi-member LLC is taxed as a partnership, and either can elect corporate or S-corporation treatment through the appropriate IRS form.¹⁶ Separately, most New Jersey LLCs need to register with the New Jersey Division of Taxation using Form NJ-REG if they sell taxable goods or services.¹⁷

The federal Beneficial Ownership Information report under the Corporate Transparency Act also sits outside the state Act. As of March 2025, all domestic entities, including New Jersey LLCs, are exempt from BOI reporting. Only foreign entities registered to do business in the United States remain subject to it.¹⁸

1
Justia Law. New Jersey Code 42:2C-18 – Formation of Limited Liability Company; Certificate of Formation
2
FindLaw. New Jersey Code 42:2C-8 – Name Requirements
3
NJ Treasury. Registry Fee Schedules
4
Business.NJ.gov. Taxes and Annual Report
5
New Jersey Legislature. Revised Uniform Limited Liability Company Act – Section 53, Administrative Action
6
Justia Law. New Jersey Code 42:2C-11 – Operating Agreement; Scope, Function, and Limitations
7
Justia Law. New Jersey Code 42:2C-37 – Management of Limited Liability Company
8
Justia Law. New Jersey Code 42:2C-39 – Standards of Conduct for Members and Managers
9
Justia Law. New Jersey Code 42:2C-40 – Right of Members, Managers, and Dissociated Members to Information
10
Justia Law. New Jersey Code 42:2C-32 – Form of Contribution
11
Justia Law. New Jersey Code 42:2C-34 – Sharing of and Right to Distributions Before Dissolution
12
Justia Law. New Jersey Code 42:2C-35 – Limitations on Distributions
13
Justia Law. New Jersey Code 42:2C-46 – Events Causing Dissociation
14
Justia Law. New Jersey Code 42:2C-48 – Events Causing Dissolution
15
Justia Law. New Jersey Code 42:2C-56 – Distribution of Assets in Winding Up
16
Internal Revenue Service. Single Member Limited Liability Companies
17
Business.NJ.gov. Register for Taxes
18
Financial Crimes Enforcement Network. Beneficial Ownership Information Reporting