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NJ "Partnership Disputes": Dissociation of a Members Interests in an LLC

Rights Of Shareholders, Members And Partners In The State Of New Jersey

In the state of New Jersey, there are various laws and legal decisions that address partnership and shareholder rights and the legal remedies that may be available to you. The legal "rights" available to you will vary depending on the nature of your equity and ownership interests. That is, are you a shareholder in a corporation, a partner in a partnership or a member in a limited liability company? The answer to this question will present different options and legal remedies that may be available to you. This article addresses some of the "legal rights and options" that members of New Jersey limited liability companies must be aware of.

Right Of Dissociation: A Significant Tool In Partnership And LLC Disputes

If you are a member of a New Jersey limited liability company and you are faced with a serious dispute with your other member(s) / partner, it is critical to be aware of and understand the "right of dissociation" that may be available to you under New Jersey law - N.J.S.A. 42:20-24. The New Jersey "dissociation statute" was designed to protect LLC members from economic harm that may be caused to the LLC by a fellow member. Under the dissociation statute, in certain instances, you may be permitted to terminate a member's interest in your LLC. This is a significant right that is difficult to invoke but nevertheless a legal remedy that you must be aware of and evaluate when faced with a membership dispute.

Learn More About Your Rights and Obligations as a New Jersey Shareholder, Partner or Member

Order a complimentary copy of "The New York and New Jersey Partnership Dispute Guide".

What You Need To Know About Dissociation

Under New Jersey's "dissociation statute" an LLC member may be "dissociated" from the LLC upon the occurrence of certain enumerated events that include a determination by a court that one member breached his or her obligations to the limited liability company. That is, when faced with a dispute with your partners/members, one option that you must consider and discuss with your attorney is terminating your partners/members equity interests. This is no easy task and it is not always appropriate, however, you must be aware of this "litigation tool". Pursuant to new Jersey's "dissociation statute" an aggrieved member may seek judicial dissociation where:

  • A member engaged in wrongful conduct that adversely and materially affected the limited liability companies business;
  • The member willfully or persistently committed a material breach of the operating agreement; "or"
  • The member engaged in conduct relating to the limited liability company business which makes it not reasonably practicable to carry on the business with the member as a member of the limited liability company.

Conclusion

If you are a member of a New Jersey LLC and you are faced with a dispute with other members/partners it is critical that you consider and evaluate New Jersey's dissociation statute. To learn more about your rights as a New Jersey shareholder, partner or member, order a complimentary copy of "The New York and New Jersey Partnership Dispute Guide" or contact Mr. Internicola's staff at 800.976.4904.

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