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What is an Operating Agreement and Why Do I Need One?

Posted by calgdasilvaon February 22, 2025in Blog Posts, Business StructureLeave a comment

Why Your Limited Liability Company (LLC) Needs an Operating Agreement

Starting a business is an exciting venture, and forming a Limited Liability Company (LLC) is one of the most popular ways to structure a small business. While an LLC provides flexibility and liability protection, many business owners overlook one critical document: the operating agreement. Even if your state doesn’t legally require it, and New Jersey does not, having an operating agreement is essential to protect your business and ensure smooth operations. Here’s why your LLC needs one.

1. Defines Ownership and Management Structure

An operating agreement lays out the ownership percentages of each member and the management structure of the company. Whether your LLC is single-member or multi-member, this document clarifies roles and responsibilities, helping to prevent misunderstandings and conflicts down the line. Clearly defined roles and responsibilities means that disagreement and dispute are less likely as your business grows.

2. Protects Your Limited Liability Status

One of the main benefits of forming an LLC is the limited liability protection it offers its owners. However, without an operating agreement, courts may view your business as a sole proprietorship or partnership, exposing your personal assets to legal claims and debts. A well-drafted operating agreement reinforces the separation between your business and personal finances, strengthening your liability protection.

3. Prevents State Default Rules from Applying

Each state has default rules that govern LLCs without operating agreements. These one-size-fits-all regulations may not align with how you want to run your business. By drafting an operating agreement, you can customize provisions related to profit distribution, voting rights, and dispute resolution, ensuring they align with your business goals. This is, in my opinion, the single most important reason to have an operating agreement. Do not allow your business to be governed by default rules and regulations. Govern your business in the way YOU best see fit.

4. Clarifies Financial and Operational Decisions

Without a written agreement, decisions regarding profits, losses, capital contributions, and distributions could lead to disagreements among members. An operating agreement clearly defines these financial aspects, reducing the chances of disputes and providing a clear process for handling financial matters.

5. Facilitates Business Continuity and Succession Planning

What happens if a member decides to leave the business, passes away, or becomes incapacitated? An operating agreement outlines the process for transferring ownership, buying out a departing member, or dissolving the business if necessary. This ensures stability and continuity, preventing legal and financial headaches in the future.

6. Enhances Credibility with Banks and Investors

Financial institutions and potential investors often require an operating agreement before they agree to lend money or invest in your business. A well-structured agreement demonstrates professionalism and foresight, making your LLC more attractive to outside funding sources.

7. Establishes Conflict Resolution Procedures

Disagreements are inevitable in any business. An operating agreement provides a framework for resolving disputes among members, potentially avoiding costly and time-consuming litigation. Whether through mediation, arbitration, or a voting system, having a predefined conflict resolution process is invaluable.

Conclusion

While an operating agreement may not be legally required in every state, it is a crucial document that provides structure, legal protection, and clarity for your LLC. Investing the time and effort to create one now can prevent significant problems in the future, allowing you to focus on growing your business with confidence.

If you haven’t drafted an operating agreement for your LLC, consider consulting Bergmann Law, to ensure your agreement meets your specific needs. Your business’s success and protection depend on it!

Understanding the Real Estate Reassessment Process in New Jersey

Posted by calgdasilvaon February 3, 2025in Blog PostsLeave a comment

The reassessment of real estate is a crucial process under the New Jersey Constitution, ensuring that property values remain equitable and reflect current market conditions. Specifically, Article VIII, Section 1, Paragraph 1 of the New Jersey Constitution requires that all real property be assessed for taxation “under general laws and by uniform rules” based on true value. This provision ensures that property assessments remain fair and equitable, preventing disparities in taxation.

While the Constitution mandates uniform assessment, the specific procedures for reassessment and revaluation are governed by state laws and regulations, including oversight by the New Jersey Division of Taxation and county boards of taxation.

What is the Reassessment Process?

Real estate reassessment in New Jersey is a systematic process conducted by municipal tax assessors to adjust property values to align with the current market conditions. The goal is to ensure that all properties within a jurisdiction are assessed fairly and equitably, thereby distributing the tax burden appropriately among property owners.

The reassessment process involves:

Data Collection: Inspecting properties and reviewing relevant data such as recent sales, property improvements, and neighborhood trends.
Market Analysis: Comparing similar properties to determine accurate and fair market values.
Adjustment of Property Values: Updating assessments to reflect changes in market conditions, ensuring a fair tax distribution.
Notification to Property Owners: Property owners are informed of their new assessments and given an opportunity to review or challenge them.

How Often is Reassessment Done?

There is no set statewide schedule for reassessment in New Jersey. The frequency of reassessment varies by municipality and is determined by local conditions and the need to maintain tax equity. However, reassessments typically occur when:

A municipality determines that assessed values no longer reflect true market conditions.

A significant disparity exists between assessed values and market values.

There is an order from the county board of taxation or the State Director of Taxation due to unequal property tax distributions.

While some municipalities conduct reassessments annually, others may only do so every few years, depending on market fluctuations and local government decisions.

Is Reassessment Mandatory?

Reassessment is not automatically mandatory across all municipalities in New Jersey. However, state law requires municipalities to maintain fair and uniform property assessments. If a municipality fails to do so, it may be compelled to reassess properties by the county board of taxation or the State of New Jersey.

Additionally, if a municipality’s tax ratio (the ratio of assessed values to true market values) deviates significantly from the state-mandated level, reassessment or revaluation may become necessary to correct the imbalance.

Purpose of Reassessment

The primary purpose of reassessment is to ensure fairness and uniformity in property taxation. Key objectives include:

Equitable Tax Distribution: Ensuring that all property owners pay their fair share of taxes based on accurate property values.
Reflecting Market Conditions: Updating property assessments to align with current market values and economic trends.
Preventing Tax Disparities: Reducing tax imbalances that may arise due to outdated assessments.
Compliance with Legal Standards: Meeting constitutional and statutory requirements for property tax administration.

How Was The Haddon Township Tax Reassessment Scheduled?

In April 2022, the Camden County Board of Taxation ordered Haddon Township to conduct a district-wide property revaluation to be completed in 2023 and implemented for the 2024 tax year. This order was approved by John Ficara, Acting Director of the Division of Taxation. Subsequently, in May 2022, the Board granted Haddon Township a one-year extension, adjusting the completion to 2024 and implementation to the 2025 tax year. camdencounty.com The revaluation was completion in 2024, with the new assessments taking effect in the 2025 tax year.

Conclusion

The real estate reassessment process in New Jersey plays a vital role in maintaining fair property taxation. While not mandated on a fixed schedule, municipalities must conduct reassessments as needed to uphold tax equity. Property owners should stay informed about reassessment practices in their area and understand how changes in property value can impact their tax obligations.

Do Your Employees Work From Home?

Posted by calgdasilvaon November 28, 2015December 1, 2015in Blog Posts, Front PageLeave a comment

Working from home, or telecommuting, has evolved from a rare and special privilege granted to only a select few, to a regular occurrence for normal employees. If your business is the type that would permit your employees to telecommute either part or all of the time, make sure your business policies are equally up-to-date and address the issues that could arise.

Working remotely has obvious attractions for both employees and employers, often for different reasons, but be ready to be flexible. Your office polices will definitely need to be updated to reflect the situation and you need to be prepared for both the successes and failures that come with telecommuters.

Develop an Appropriate Remote Work Policy

Some employers develop remote work policies out of necessity, for example when a key employee relocates or has a personal situation arise that requires them to spend less time in the office. Keep in mind, however, that developing a policy as a reaction to circumstances is not ideal – it is much better to plan ahead. And remember all of the aspects of moving an employee to an out-of-the-office worker: IT issues, tax issues, insurance, privacy concerns, and a clear, evenly applied remote policy.

There is no reason to fear telecommuting. In fact, the ability to work remotely is generally viewed as a benefit by employees. Offering telecommuting to employees often means you can retain key people in your organization and your business as a whole becomes more attractive to potential employees. It is also important to remember that the Equal Employment Opportunity Commission argues that, on occasion, working from home must be considered as a reasonable accommodation option, even if the employer has no existing telecommuting program. However, all this means is do not say no to a remote working arrangement before you analyze the options. Importantly, federal courts of appeal have concluded that regular, on-site attendance is often an essential function of many jobs and, in those circumstances, an employer is not required to offer the employee the option to work at home.

Questions You May Not Have Considered

Working remotely may permit the employee’s work location to be in a different state from the employer’s business, such as here in South Jersey, so close to the Pennsylvania border. You must determine which state laws will regulate the work and to which state the employee will owe taxes. Be careful! New Jersey is a state that insists remote activity requires an employer to pay state corporate taxes. The employer should also clear remote work activity with local zoning laws or property restrictions which may either inhibit or ban commercial activity in the employees’ homes.

I Do Not Want to Pay My Employee to Sit Home and Watch Netflix

Compensating non-exempt employees can be the most challenging aspect of tackling a remote work policy. Usually work is measured and compensated by time – the amount of hours the employee is in the office. Time in the office is easy to measure and monitor with supervisors, a time-clock or computer log in records. An employer who wants to rely on more than a telecommuting employee’s say so must get creative and develop technological methods to substitute for the traditional time clock, such as a computer log-in records. There will have to be a level of trust developed and certainly the work product output should have relation to the hours logged.

What Now?

If you would like to explore a telecommuting policy to offer your employees, give us at Bergmann & Good a call to discuss the options.