Dissolution of a business is never at the forefront of someone’s mind when they start a new company. Nobody gets into business with the intention of terminations, but there are countless reasons why it may be necessary or preferable to close a company at a later date. The LLC may have become unprofitable, just as an LLC may fall into insurmountable debt when things take a turn for the worse.
If you have made the decision to dissolve your New Jersey LLC, there are specific steps that need to be taken. Not only does your limited liability company need to be in good standing, but dissolving an LLC in New Jersey means ticking all legal and administrative boxes. Not to mention, ensuring you pay any taxes and other outgoings that may apply, in order to avoid a potential tax penalty. If your business is set up elsewhere, check out how to dissolve LLC in California, or how to dissolve an LLC in Florida the right way, for example. We also give you guidelines on how to dissolve an LLC in Missouri.
The dissolution process in New Jersey is not particularly difficult but can be quite time-consuming. Find out if it is any different to how to dissolve your LLC in New York nearby, how to close your LLC in Colorado, or the ways to dissolve LLC in Kentucky for that matter. It is therefore a good idea to submit your certificate of dissolution to the State of New Jersey at the earliest possible stage, in order to compensate for any potential hold-ups. Any delays at the state department or the Jersey Division of Revenue could potentially extend the dissolution process by several weeks or months.
If in doubt, legal advice should also be sought at the earliest possible stage, in order to ensure you understand your obligations and entitlements. In addition, you can find more about the ways to dissolve your LLC right in this dedicated post. And if you are just about to start a business, look here for a top-rated LLC formation service.
Dissolving a New Jersey LLC
Closing a business in New Jersey means first making sure that your LLC is in good standing. Though the term ‘good standing’ is somewhat ambiguous, it basically means that your business is in a relatively amicable legal position in terms of taxes, debts, relationships with third parties, and so on. In addition, we give you guidelines on how to dissolve an LLC in Delaware, how to dissolve an LLC in Nevada, and how to dissolve an LLC in Wisconsin.
If this is the case, the first thing that needs to be done to dissolve LLC in New Jersey is to organize a vote that includes all LLC members. Anyone who has a formal state in your business entity should be called to a meeting at a convenient time and date, in order to vote on dissolving the company or otherwise. Of course, this is only required if there are multiple LLC members – it is not necessary if you are running a single-member LLC.
If a majority of members vote in favor of termination, the next steps can be taken. If not, the LLC cannot be dissolved as there is still a clear majority of desire to keep it open. Additionally, learn how to dissolve an LLC in Texas where they don't have a state LLC Act. Moreover, upon reading how to close your LLC in Pennsylvania, you'll be surprised that PA doesn't require LLCs to publish or notify creditors about the dissolution.
Official policy published by the state of New Jersey indicates that the major steps LLCs need to take to cancel their operations and their existence include the following:
•Satisfying all debts and liabilities of the LLC
•Distributing the remaining assets of the LLC
•Settling all potential legal suits, including civil, criminal, and administrative suits
•Transferring property belonging to the LLC
Prior to any of the LLCs assets being distributed to its members or owners, it is essential to make sure all debts and taxes have been settled. If not, penalties and/or lawsuits may follow.
Filing Notice to Creditors
It is also important to ensure you inform your creditors of your intention to end your business and the fact that you can no longer take on any further debt. It is prudent to submit this information at the earliest possible stage so that subsequent steps can be taken to ensure all debts are settled and unresolved issues addressed. Also, check out how to close your LLC in Ohio, to boot.
If you attempt to dissolve your business without providing creditors with sufficient notice, they may have the right to file a lawsuit against you and your business stands to incur further losses. Such debts may subsequently be passed directly on to the owners or members of the business if they cannot be settled by the LLC during the dissolution process. Check out if that's the case when you dissolve LLC in Georgia, for example.
Making Sure Your LLC is in Good Standing
As touched upon earlier, it is only possible to commence the dissolution process in New Jersey if your business is in good status at the time. This means ensuring that all tax payments, tax returns, and annual reports are up to date and settled.
Settling these outgoings and issues in advance should therefore be prioritized, as you will not be able to proceed otherwise.
New Jersey law permits only organizations that are in good standing to dissolve. To be in good standing, the LLC must be current on any required annual reports, tax returns, and tax payments. If your LLC has been revoked, you must reinstate it before you can dissolve it.
Complete the Required Form and File it with the Division of Revenue
The NJ Division of Revenue states that if you formed your LLC prior to March 20, 2013, you will need to file a certificate of cancellation. If your LLC was formed at a later date, you will instead need to file a certificate of dissolution.
Every form and document required to file either notice is available online via the Annual Reports and Change Services. If preferred, the forms can be printed and sent via mail, or handed in personally at the office in Trenton NJ.
In order to cancel an LLC, you will need to file a Certificate of Cancellation using Form L-109. If looking to dissolve your ND LLC, you will need to file a Certificate of Dissolution using Form L-110.
A Certificate of Termination Form L-110A will also need to be filed when all affairs are in order.
Information that needs to be included when filing a notice to close your company includes the following:
- Company name
- LLC entity number (Employer Identification Number)
- Date in which you initially formed your LLC
- Date in which you want to formally dissolve your LLC (must not be before, on, or 30 days subsequent to the filing of the cancellation)
- Clarification of the reason(s) for dissolving your LLC
- Signatures of one or more people who are authorized to file for closure on behalf of the LLC’s members
Fees are payable at the time of submission, with a different fee charged for domestic LLCs and foreign LLCs. The current fees at the time of writing are $100 and $125 respectively.
Tax clearance must then be granted – applicable to any business in New Jersey that generated any revenues while in operation. Tax clearance will only be granted when your final tax returns and tax liabilities, in general, have all been settled. The NJ Division of Taxation will subsequently provide you with a certificate as proof that you have settled your tax obligations.
Fees are again payable at the time of application submission – you can pay your fee online with a credit or debit card. It is also possible to pay the required fee in person, but there is really no need to do so.
Wind up the LLC’s affairs
Winding up the business affairs is an important part of the company cancellation or closure process, which basically means ensuring all obligations have been met and debts settled. What needs to be done will (or should) be clearly outlined in the operating agreement formalized when the business was formed. If not, statutory state law applies.
An LLC is legally allocated a reasonable amount of time after dissolution to take the steps needed to wind up its affairs. According to the New Jersey Division of Revenue, this includes the following among other activities:
- discharging the company's debts, obligations, and liabilities
- settling and closing the company's activities
- marshaling and distributing the company's assets
- filing Form L-109 or Form L-110
- prosecuting and defending any outstanding civil, criminal, or administrative proceedings
- transferring the company's property
- settling disputes by mediation or arbitration
- filing Form L-110A stating the name of the company and that the company is terminated
As previously mentioned, it is not a legal requirement to provide creditors with advance warning that you intend to shut down your business. However, it is highly advisable to do so in order to give yourself sufficient time to get your affairs in order.
When Does the Dissolution Become Effective?
A business entity in New Jersey is only officially dissolved when the NJ Division of Revenue receives, processes, and approves the certificate filed by the LLC. This includes submitting the required Articles of Dissolution and the Notice of Tax Clearance, confirming that the business is in good standing.
Until this happens, you are still liable for your LLC and any activities undertaken or action taken against it. Again, this is why it is advisable to begin the process of dissolving your business at an early stage, rather than attempting to rush things at the last moment.
Out of State Registrations or Qualifications
On a final note, it is important to remember that any out-of-state (foreign) LLCs registered will need to be dissolved in accordance with the state-specific rules and regulations of the jurisdiction in question. This also applies to LLC that were permitted to do business in other states, where state-specific rules for termination/closure also apply.
This is where legal advice can prove invaluable, as it is essential to understand your legal obligations and entitlements. Heavy penalties and ongoing taxes may apply if you fail to appropriately dissolve any foreign registrations or qualifications to do business at the appropriate time.