New Jersey LLC Operating Agreement: What to Include and Why It Matters

New Jersey does not legally require LLCs to have a written operating agreement. Your LLC is valid once you file a Certificate of Formation with the New Jersey Division of Revenue and pay the filing fee (as of early 2026, $125). But operating without a written agreement means your LLC is governed entirely by the default rules of the New Jersey Revised Uniform Limited Liability Company Act (RULLCA, N.J.S.A. 42:2C-1 et seq.), and those defaults may not reflect what the members actually intended. Under RULLCA's defaults, distributions are split equally among members regardless of how much each contributed, management decisions are made per capita (not based on ownership percentage), any act outside the ordinary course of business requires unanimous consent, and members cannot compete with the LLC or transact business with it as a third party.

For most businesses, these defaults create problems. A member who invested 90% of the capital receives the same distribution as a member who invested 10%. A routine business decision that one member disagrees with can be blocked. The inability to transact with the LLC prevents common arrangements like a member leasing property to the company. A well-drafted operating agreement replaces these defaults with terms the members chose themselves. This guide covers what every New Jersey LLC operating agreement should include and how RULLCA affects your business if you do not have one.

RULLCA: New Jersey's LLC Law

The Revised Uniform Limited Liability Company Act became effective for all New Jersey LLCs in March 2014, replacing the original 1993 LLC Act. RULLCA modernized New Jersey's LLC law and aligned it with the national Revised Uniform LLC Act, but it also changed several important default rules. Almost all of RULLCA's provisions are default rules, meaning they apply only if the operating agreement does not address the issue. However, certain provisions are non-waivable: the LLC's right to sue and be sued, the requirement that New Jersey law governs internal affairs, members' fiduciary duties of loyalty, care, and good faith (which can be modified but not eliminated entirely), members' rights to receive information (which can be restricted but not unreasonably), and the dissolution and winding-up procedures. Understanding which provisions can be modified and which cannot is essential to drafting an effective operating agreement. For a comparison with New York LLC law, see our New York operating agreement guide.

Essential Provisions

Member Information and Capital Contributions

The operating agreement should identify each member by name, specify their initial capital contribution (cash, property, services, or promissory notes), and define their ownership percentage. Unlike corporations, New Jersey LLCs are not required to issue stock or maintain strict capital requirements, but unclear contribution terms lead to ownership disputes. The agreement should also address whether additional capital contributions are mandatory or voluntary, what happens if a member fails to make a required contribution, and how the value of non-cash contributions is determined. Document the value of every contribution at the time it is made to prevent disputes later.

Management Structure

New Jersey LLCs must choose between member-managed and manager-managed structures. Under RULLCA, the default is member-managed with equal management authority for all members, regardless of ownership percentage. In a member-managed LLC, each member has equal authority to bind the LLC in the ordinary course of business. In a manager-managed LLC, the members appoint one or more managers (who may or may not be members) to handle day-to-day operations, and the members retain authority only over major decisions. The operating agreement should clearly state which structure applies and define the scope of management authority, the process for appointing and removing managers, the compensation of managers, which decisions require member approval (and at what voting threshold), and how deadlocks are resolved.

Voting Rights and Decision-Making

Under RULLCA's defaults, management decisions in a member-managed LLC are made per capita (one member, one vote) regardless of ownership percentage. For most businesses, this is unworkable. The operating agreement should specify whether voting is based on ownership percentage or per capita, which decisions require a simple majority and which require a supermajority or unanimity, how meetings are called and how notice is provided, whether members can vote by written consent or proxy, and what constitutes a quorum. Major decisions that typically require supermajority or unanimous consent include amending the operating agreement, admitting new members, selling all or substantially all of the LLC's assets, merging the LLC with another entity, taking on significant debt, and dissolving the LLC.

Profit and Loss Allocation

RULLCA's default is equal distribution regardless of ownership percentage. This means a 90% owner and a 10% owner each receive 50% of distributions unless the operating agreement provides otherwise. The operating agreement should specify how profits and losses are allocated (typically in proportion to ownership interests, but alternative structures are permissible), when distributions are made (quarterly, annually, or at the managers' discretion), whether the LLC maintains reserves before making distributions, and how guaranteed payments to members (similar to a salary) are treated. Tax implications are significant: New Jersey LLCs are pass-through entities, meaning members report profits and losses on their personal tax returns regardless of whether distributions are actually made. New Jersey imposes a minimum tax of $150 per member for LLCs with two or more members.

Transfer Restrictions

Under RULLCA, a member can transfer their economic interest (right to receive distributions) but cannot transfer their management rights without the consent of all other members. The transferee receives only a transferable interest, not full membership. The operating agreement should include a right of first refusal (giving the LLC or the other members the first opportunity to purchase a departing member's interest), restrictions on who can become a member (requiring approval of a majority or all existing members), drag-along and tag-along rights, buy-sell provisions governing what happens upon death, disability, retirement, or voluntary withdrawal, and a valuation method for determining the purchase price. For a comprehensive guide to buy-sell provisions, see our buy-sell agreement guide.

Fiduciary Duties

RULLCA imposes fiduciary duties of loyalty, care, and good faith on members of member-managed LLCs and on managers of manager-managed LLCs. The operating agreement can modify the scope of these duties, but it cannot eliminate the obligation of good faith and fair dealing entirely. Modifications must not be manifestly unreasonable. Common modifications include permitting members to engage in competing businesses (waiving the duty of loyalty's non-competition default), allowing transactions between a member and the LLC with proper disclosure, and defining standards for the duty of care (such as limiting liability to willful misconduct or gross negligence). Without these modifications, RULLCA's defaults prohibit members and managers from competing with the LLC or transacting with the LLC as a third party, which can be overly restrictive for many businesses.

Indemnification and Exculpation

RULLCA provides that LLCs must indemnify members, managers, and others acting on behalf of the LLC. However, the operating agreement can modify or eliminate indemnification. The agreement can also include exculpation provisions limiting personal liability for money damages. Under RULLCA, exculpation cannot cover breaches of the duty of loyalty, receipt of improper personal benefits, improper distributions, intentional harm to the LLC or a member, or intentional criminal conduct. Your attorney should draft indemnification and exculpation provisions that protect the members and managers while complying with these statutory limits.

Dissolution and Withdrawal

Under RULLCA, a member no longer has the right to withdraw from the LLC and receive the fair value of their interest (as was permitted under the prior law). A withdrawing member retains their economic interest but loses management rights. The operating agreement should address the circumstances under which a member can withdraw, whether the LLC or the remaining members are obligated to purchase a withdrawing member's interest, the valuation method and payment terms for a buyout, and the events that trigger dissolution (deadlock, unanimous consent, court order, or specific triggering events). For more on what happens when an LLC is dissolved, see our business dissolution guide.

Oppression Remedies Under RULLCA

RULLCA added remedies for members who are victims of oppression by other members or managers. A court can dissolve the LLC, appoint a custodian or provisional manager, order the sale of an oppressed member's interest to the LLC or the other members at fair value, and award legal fees. These remedies provide minority members with protections similar to those available to minority shareholders in closely held corporations under the New Jersey Business Corporation Act. The operating agreement can establish internal dispute resolution procedures (mediation, arbitration) that may resolve oppression claims before they reach the courts. For a comparison with shareholder oppression remedies in New York, see our shareholder disputes guide.

Charging Orders and Creditor Protection

If a member's personal creditor obtains a judgment against the member, the creditor can seek a charging order against the member's interest in the LLC. The charging order acts as a lien, directing the LLC to pay to the creditor any distributions that would otherwise go to the debtor-member. RULLCA also allows a court to order foreclosure on the charged interest if distributions will not satisfy the judgment within a reasonable time. The foreclosure purchaser receives only a transferable interest (not full membership), but the threat of foreclosure can still disrupt the LLC's operations. The operating agreement should address how charging orders are handled and whether the LLC has the option to purchase the charged interest to avoid disruption.

NJ-Specific Tax Considerations

New Jersey imposes several taxes that affect LLCs. Multi-member LLCs file a New Jersey Partnership Return (NJ-1065) and are subject to a minimum tax of $150 per member per year. Single-member LLCs are disregarded for federal tax purposes and report income on the owner's personal return. New Jersey also imposes the Corporation Business Tax on LLCs that elect to be taxed as corporations. The Annual Report filing fee is $75, due by the last day of the LLC's anniversary month. Failure to file results in penalties and can lead to administrative dissolution. The operating agreement should address tax elections, the allocation of tax obligations among members, and the obligation of the LLC to make tax distributions (distributions sufficient to cover each member's tax liability on their share of the LLC's income). Your attorney and accountant should coordinate on the tax structure and filing obligations from the outset to avoid penalties and ensure compliance with all New Jersey requirements. For guidance on starting a business in NJ, see our NJ nonprofit guide and our NJ real estate practice page.

Frequently Asked Questions