Since the entity known as a Limited Liability Company, or “LLC” came along in New Jersey in 1993, it has quickly become one of the most common business forms. LLCs are popular largely because of their flexibility, limited liability, and tax advantages.
For example, as long as they meet the requisite qualifications, an LLC may elect to be taxed as a sole proprietor, partnership, C corporation, or S corporation, which means it may avoid the double taxation of a C corp wherein both the owners and the company are taxed. Also, although an LLC is not incorporated, in many instances, LLC owners – called “members” – are protected from personal liability for the company’s debts the way a corporation is.
New Jersey’s Limited Liability Company Act was enacted in 1993, and while it has been revised in 1996 and 2006, revisions have been minor until recently. On September 21, 2012, Governor Christie signed the Revised Uniform Limited Liability Company Act which is scheduled to go into effect for new LLCs on March 20, 2013. (For existing LLC’s it will become effective in March of 2014.)
The new law will include several revisions and additions, including the following:
- Duration: Under the prior law, an LLC has a default duration period of thirty years unless the members designate otherwise on the certificate of formation. Under the new law, an LLC will have an unlimited or perpetual duration period unless otherwise indicated on the certificate, which is more like a corporation which is also considered to have perpetual existence.
- Not-for-Profit: The new law allows LLCs to be formed for any lawful purpose regardless of whether they are for profit or not-for-profit or formed to own non-income-producing property.