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Every New Jersey LLC should have an Operating Agreement, but getting one doesn’t have to be expensive. You can download and customize your own Operating Agreement using our free template below.
Here is a Member-managed Operating Agreement template available in 3 formats. This can be used for a Single-Member LLC or a Multi-Member LLC.
A Member-managed LLC is where all the Members (LLC owners) have the ability to legally bind the LLC in contracts and agreements. The LLC Members also run the business and day-to-day operations.
Here is a Manager-managed Operating Agreement template available in 2 formats. This can be used for a Single-Member LLC or a Multi-Member LLC.
A Manager-managed LLC is where one or more designated people (called Managers), have the ability to legally bind the LLC in contracts and agreements. The LLC Manager(s) also run the business and day-to-day operations.
The Members can't legally bind the LLC in contracts and agreements. They also don't take part in running the business and day-to-day operations. Instead, they take a passive/investor role.
However, the Members vote the Manager(s) into their position and are required to vote on certain things, like adding or removing an LLC Member.
Which one should I choose? It depends on how you want your LLC to be managed. Please see Member-managed vs Manager-managed LLC for more details. If you’re not sure which one to use, we recommend using the Member-managed Operating Agreement. This is the most common type of LLC management.
A New Jersey LLC Operating Agreement is a written contract between the LLC Members (LLC owners). This legal document includes detailed information about LLC ownership structure, who owns the company and how the LLC is managed.
Single-Member LLCs and Multi-Member LLCs should draft an Operating Agreement, keep it with their business records, and give a copy to all Members.
Your Operating Agreement will include basic information about your Limited Liability Company. Some of the information will be the same as what is listed in your New Jersey LLC Certificate of Formation. Operating Agreements should include:
Your Operating Agreement will list all the LLC’s Members and how much of the Limited Liability Company they each own.
How much of the LLC someone owns is called their “LLC Membership Interest”.
LLC Membership Interest is most often expressed as a percentage (like 5%, 50%, 100%, etc.).
Note: Some people make the mistake of saying they are “shareholders” of an LLC. This isn’t accurate. The terms “shares” or “shareholders” do not exist when talking about LLCs. The term “shares” specifically refers to ownership in a Corporation.
After your LLC is approved, you should open an LLC bank account and put money into that account.
Each of the LLC Members makes an initial capital contribution. Capital contribution simply means a deposit of money into the LLC bank account.
You will list the initial capital contributions in your LLC’s Operating Agreement.
Pro tip: If you complete your Operating Agreement before you have opened an LLC bank account, just enter the amount the Members plan to deposit. If the amount of your deposit changes, it’s okay to edit your Operating Agreement with the actual amounts later.
You will list how your LLC will be taxed in your Operating Agreement. There are four common ways an LLC can be taxed:
Note: Husband and wife LLCs can sometimes be taxed as a Qualified Joint Venture LLC. To do this, the LLC must be formed in a community property state. New Jersey is not a community property state, so your New Jersey LLC can’t be taxed as a Qualified Joint Venture.
The rules of membership voting will be spelled out in your New Jersey LLC’s Operating Agreement.
If you use the Member -managed Operating Agreement, the voting powers are proportionate to the LLC Membership Interest.
If you use the Manager -managed Operating Agreement, the voting powers are also proportionate to the LLC Membership Interest. Then the Members vote to elect a Manager or Managers. The Manager(s) then has authority to make certain decisions on behalf of the LLC (without needing a vote by the Members).
However, certain things, like adding or removing an LLC Member, require a vote of the Members (and the Manager has no say).
Once you finalize your Operating Agreement, make sure all the Members have a copy.
We recommend keeping a copy of the Operating Agreement with your LLC business records.
As per Section 42:2C-11 of the New Jersey LLC Act, an Operating Agreement isn’t required for an LLC under New Jersey law.
But while it’s not required in New Jersey to conduct business, we strongly recommend having an Operating Agreement for your LLC.
Additionally, financial institutions (like banks) and other organizations may need to see a copy of this paperwork in order for you to do business with them.
Why should an LLC with only one Member still have an Operating Agreement?
It’s best to have a written Operating Agreement, even if you are the sole Member of your New Jersey LLC (a Single-Member LLC).
If you go to court, an Operating Agreement helps prove that your Single-Member LLC is being run as a separate legal entity. That confirms the company’s limited liability status, and that is what protects you from personal liability for company debt.
Does a Multi-Member LLC need an Operating Agreement?
It’s best to have an Operating Agreement, especially for a Multi-Member LLC. This document will spell out ownership percentages, profit distribution, and management responsibilities.
If you go to court, an Operating Agreement helps prove that your Multi-member LLC is being run as a separate legal entity.
Do I have to send my Operating Agreement to the state?
No, you don’t have to send your Operating Agreement to the New Jersey Department of State, or any other government agency.
Operating Agreements are “internal documents”. Meaning, the Members just need to keep a copy with their business records.
The Operating Agreement is a legally binding document upon the LLC Members because of the Members’ signatures. It doesn’t need a government stamp of approval.
However, in the future, if your company were involved in a lawsuit or an audit, a court or government agency might ask to see a copy of your Operating Agreement.
Additionally, you may also need to show this document to:
No, your Operating Agreement doesn’t need to be notarized. Each Member just needs to sign it.
Once you (and the other LLC Members, if applicable) sign the Operating Agreement, then it becomes a legal document.
Can I write my own Operating Agreement?
Yes, but we recommend using an Operating Agreement template.
A New Jersey Operating Agreement is a legal document. You don’t have to hire an attorney to write one, though. Using a template helps make sure you cover everything you need to.
LLC University® offers free Operating Agreement templates that you can download and customize to write your own LLC Operating Agreement.
How do you write a simple Operating Agreement?
If you wanted to write simple New Jersey LLC Operating Agreements without using a template, you could. You’d need to check with the New Jersey LLC Act to make sure it meets all the requirements.
For example, at a minimum, you’d want your New Jersey LLC name, your Registered Agent information, your business purpose, the names of the LLC Members, and information about initial capital contributions.
However, there is a lot more information that is important to document about your LLC.
It’s probably a lot easier to start with an existing template. We have a free Operating Agreement template you can download on this page.
What is the difference between an LLC and an Operating Agreement?
Limited Liability Companies (LLCs) are business entities. Said another way, an LLC is a type of business structure. An LLC is a legal business entity that you form by filing a document called the Certificate of Formation with the state.
An Operating Agreement is an internal document that governs how your LLC is run. It contains rules about how much of the company each Member of the LLC owns, and other details about management and taxes.
Said another way, the LLC is your legal entity. And the Operating Agreement is a written set of rules for how the LLC will operate.
New Jersey state law allows you to have an LLC without an Operating Agreement (but you shouldn’t). But you can’t have an Operating Agreement without an LLC.
How do I set up an LLC in New Jersey?
Matt Horwitz is the leading expert on LLC education, and has been teaching for 15 years. He founded LLC University in 2010 after realizing people needed simple and actionable instructions to start an LLC. He's cited by Entrepreneur Magazine, Yahoo Finance, and the US Chamber of Commerce, and was featured by CNBC and InventRight.
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.
