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Get out of That New Jersey LLC before the Law Changes?

In my last post, I wrote about the fact that your right to simply withdraw from a New Jersey LLC and be paid fair market value for your shares – provided the Operating Agreement does not prohibit this – is being eliminated on March 1, 2014.  Many readers of that post have contacted me, hoping there was a way to extend that deadline.  Unfortunately, it cannot be extended.  The amendment to the LLC Act is already “on the books,” and takes effect on March 1st.  There is simply no way around this.

What many of these clients have in common is that they believe they MAY be being taken advantage of by the majority owners, but they are not sure.  What if you find yourself in this situation?  What is the best course of action?  Should you withdraw from the LLC while you can, and just be paid for your interest?  Or should you hold out and see how things go, and whether things get any better?

Obviously, that is a very personal and individual decision that each client must make on his or her own.  But there is one thing everyone making this decision needs to keep in mind.  If you are reading this post, you have already decided that there is a significant enough issue to cause you to explore legal representation.  If you have only suspicion that the majority owners are engaged in wrongdoing – but don’t yet have the proof – the trust relationship has already been eroded, if not completely destroyed.  While I obviously cannot know what an investigation will uncover – whether on your own or with the aid of an attorney or a forensic accountant – there is one thing that is known.  If you wind up suing your business partners after March 1st for oppression under the amended LLC Act, the action will cost much, much more than if you had taken advantage of the expiring right to simply withdraw and be paid.

If you own an interest in a New Jersey LLC and are even contemplating “getting out,” you should seek legal counsel immediately, before your options dramatically change.