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An operating agreement is the rulebook for a limited liability company (LLC). It explains who owns the company, who makes decisions, how profits are shared, and what happens when a member wants out. At Puff, Sierzega & MacFeeters Law Offices, our business law attorneys draft and review LLC operating agreements throughout Gloucester County. That includes single-owner startups in Woodbury and family-run farms and businesses in Mullica Hill and Swedesboro.
Why Your LLC Needs a Written Operating Agreement
New Jersey does not require an LLC to file its operating agreement with the state, and the law even recognizes oral or implied agreements. However, relying on an unwritten understanding can lead to serious disputes. When an operating agreement is silent on an issue, the New Jersey Revised Uniform Limited Liability Company Act fills the gap with default rules that may not match what the owners intended.
For example, under the default rules:
- An LLC is managed by its members unless the agreement says otherwise
- Ordinary business decisions in a member-managed LLC are generally made by a majority of the members
- Certain major actions, such as amending the operating agreement, generally require the consent of all members
- Distributions are generally made in equal shares among members unless the operating agreement provides otherwise
A written agreement lets members set their own rules.
What an Operating Agreement Should Address
Every LLC is different, but a strong operating agreement typically covers:
- Each member’s ownership percentage and capital contributions
- Whether the LLC is member-managed or manager-managed
- Voting rights and which decisions require unanimous approval
- How profits, losses, and distributions are allocated
- Procedures for admitting new members
- Buy-sell provisions for a member’s death, disability, divorce, or departure
- How a departing member’s interest will be valued
- Dispute resolution, including mediation or arbitration
Operating Agreements for Single-Member LLCs
Even a one-owner LLC benefits from a written operating agreement. It helps show that the business is a separate legal entity, which can matter if a creditor later tries to reach the owner’s personal assets. Banks and lenders also commonly ask to see an operating agreement before opening accounts or extending credit.
Fiduciary Duties and Their Limits
Members and managers may owe duties of loyalty and care to the LLC, along with the contractual obligation of good faith and fair dealing. New Jersey law allows an operating agreement to modify certain duties within statutory limits, but some obligations cannot be eliminated. Careful drafting helps avoid terms that may be unenforceable.
When an Operating Agreement Is Missing or Outdated
Many Gloucester County businesses were formed years ago with a short template agreement, or with no agreement at all. As a business grows, adds members, or prepares for the next generation, the original terms may no longer fit. Our attorneys can review an existing agreement, identify gaps, and draft amendments. If you are forming a new company, our )LLC formation attorneys can prepare the agreement as part of the process.
Talk to a Gloucester County Operating Agreements Lawyer
Our firm has helped Gloucester County business owners plan for the future since 1978. Whether you need a new operating agreement or a review of an existing one, call 856-845-0011 today or contact us online to schedule a consultation with our team.