When a business is no longer profitable, or the owners want to move on to other opportunities, dissolving your New Jersey limited liability company may be the best option.
This article will provide a complete guide on how to dissolve an LLC in New Jersey. We will cover the reasons for dissolution, the process for voluntary and involuntary dissolution, and what happens after the LLC is dissolved.
Steps to Dissolving a New Jersey LLC
A New Jersey LLC must follow the formal process of dissolution as outlined in the New Jersey Limited Liability Company Act. Skipping any necessary steps or performing them partially can lead to penalties and other legal issues.
The following steps for the dissolution of New Jersey LLCs are equally essential and should be completed in the order listed.
Step 1: Give Notice to LLC Members
The first step in dissolving an NJ LLC is to notify all LLC members.
In fact, it is best to hold a meeting of the LLC members to discuss the proposed dissolution and vote on it. The notice must include the effective date, time, and place of the meeting and a statement that the purpose of the meeting is to dissolve the LLC.
The notice should also be sent by certified mail, return receipt requested, at least 20 days before the meeting is scheduled to take place.
If the LLC has only one member, they do not need to notify anyone and proceed directly to step two.
Step 2: Notify Creditors
This can be done by sending a written notice or by publishing a notice in a newspaper in the county where the LLC's principal place of business is located.
The notice must include the date when the dissolution will take effect, the reason for dissolution, and a statement that any objections to the LLC dissolution must be filed within 30 days of receipt of the notice.
Business debts must be paid off before the LLC can be officially dissolved.
If a New Jersey LLC has any unpaid debts, it must continue to operate until all obligations have been satisfied or the creditors approve a plan for their payment.
Step 3: Consult the New Jersey LLC Operating Agreement
Every New Jersey LLC should have an operating agreement. In all probability, you created an operating agreement when your New Jersey business first started.
Apart from other provisions, such as how to conduct business and day-to-day operations, your New Jersey LLC operating agreement should have provisions about the dissolution process.
The New Jersey LLC operating agreement may have provisions different from the procedures outlined in New Jersey law, but these will usually be more favorable to LLC members and creditors.
If there are no such provisions, the New Jersey Limited Liability Company Act will apply by default.
The agreement will probably outline what will happen with the LLC assets when it is dissolved.
For example, the agreement may state that some or all of these LLC assets will be distributed to LLC members.
If so, they must ensure that any creditors are taken care of before making this distribution as per the New Jersey LLC operating agreement.
Step 4: Close LLC Business Accounts
Your business entity must close any bank or investment accounts it has. This can be done by completing a letter of instruction and sending it to the financial institution.
The letter should list all account numbers, your business name, and contact information for the individual handling final affairs for the business.
Conducting business after you close business accounts can lead to criminal charges. Ensure all final bills and obligations are paid off before dissolving your New Jersey LLC.
Once the bank accounts have been closed, remove the business name from any licenses or permits it holds.
This can be done by filing a form with the appropriate agency. You may also need to notify clients, customers, and other contacts of your decision to dissolve.
Step 5: Obtain Tax Clearance
After all LLC assets have been liquidated, a New Jersey LLC should file a final return for federal and state taxes.
LLC owners must submit a Tax Clearance Request with the New Jersey Revenue and Enterprise Services Division. The prerequisite to obtaining a Tax Clearance Certificate is to have a good standing with the New Jersey Revenue Division.
Being in good standing with the state means all taxes for your New Jersey LLC must be paid up to date.
Provided that your LLC generates revenue, you have to file the final tax returns with the IRS. You can use two forms depending on your tax structure - corporations file Form 1120 while LLCs taxed as partnerships file Form 1065.
Step 6: File for the Certificate of Cancellation
A New Jersey LLC can't be officially dissolved until it receives the LLC Certificate of Cancellation. This document can be obtained from the NJ Division of Revenue. The filing fee is $100. The certificate of cancelation can be filed either online or by mail.
There are a few things you need to include in your Certificate of Cancellation application:
- The name and mailing address of the LLC
- The effective date of the cancellation (must be after the date you filed for dissolution)
- A statement by one or two members confirming the LLC has zero debts or liabilities
- A statement by one or two members saying they have provided notice of dissolution to all creditors, employees, and other interested parties
- The filing date of your New Jersey LLC Articles of Dissolution (must be on file with the New Jersey Division of Revenue)
- The reason for cancellation (voluntary cancellation, failure to pay annual reports, etc.).
A New Jersey business can't just dissolve until the Secretary of State (Department of Revenue) approves the certificate of cancellation. If there are errors or omissions, you'll have an opportunity to correct them before they authorize the cancellation.
Pay special attention to the New Jersey LLC Articles of Dissolution to avoid future revisions.
Reasons to Dissolve an LLC in New Jersey
An LLC in New Jersey can stop conducting business for a variety of reasons. On some occasions, the owners can decide to dissolve the business independently.
That is voluntary dissolution, and it must follow the specific steps set out in the New Jersey law.
In other cases, an LLC may have to dissolve because of a dispute or some other event outside of the company's control. This is called involuntary dissolution.
Voluntary dissolution of an LLC in New Jersey
When the owners decide to voluntarily dissolve a New Jersey LLC, it usually happens due to the following reasons:
- The business has become unprofitable, and the owners want to close it down
- The LLC's purpose was to complete a particular project. After that project is finished, the company can no longer continue its business activities
- There is a conflict between the members of an LLC, and they decide to dissolve it so each shareholder to go their separate ways
- One or more members want to leave the LLC, and the rest of the owners do not want them to take the company's name or assets with them.
Involuntary dissolution of an LLC in New Jersey
When LLCs in New Jersey lose their good standing with the state of New Jersey, the state has the right to impose penalties and even dissolve the company involuntarily.
An LLC can lose good standing in a few ways, but the most common is when the company fails to file its annual reports with the state, misses taxes, or fails to pay its filing fee.
If the state decides to dissolve an LLC involuntarily, it will first send the company a notice of intent to dissolve.
This notice will include the reasons why the LLC is being dissolved and a date by which the company can take action to save itself. If the LLC does not respond or take action, the state will dissolve the company.
If you are an LLC in New Jersey that is in danger of being dissolved involuntarily, there are a few things you can do to save yourself.
The most important is to take action quickly and respond to any notices from the state.
You can also try to get back into good standing with the state by correcting any mistakes you have made, such as filing late annual reports or paying back taxes.
How Do I Dissolve a Foreign LLC in New Jersey?
Foreign LLCs in New Jersey have to submit a Certificate of Cancellation with the Department of Revenue either in person or by mail.
The Certificate of Cancellation must include the following information: the name and jurisdiction of the LLC, the date dissolution was authorized by the governing body, a statement that all debts, obligations, and liabilities have been paid or discharged. The filing fee is $125.
How Much Does It Cost to Dissolve an LLC in NJ?
The Certificate of Cancellation is $100. Expedited service fee allows for same-day processing for an additional $50, while 2-hour services cost an additional $500.
How Do I Dissolve a Single-Member LLC in New Jersey?
The procedure is the same as dissolving a multi-member New Jersey LLC. The only difference is that the consent of all members is not required. After winding up company affairs, the owner has to file a dissolution notice with the New Jersey Revenue Division. This can be done online or by mail. The form can be downloaded from the division's website.
What Happens if I Don’t Dissolve My LLC in NJ?
Giving notice and filing the certificate of dissolution are two crucial steps in dissolving your LLC. If you do not complete both, then your company won't be legally dissolved by the state.
This means that it will continue to exist as a legal entity for tax purposes. You'll still need to file annual reports with the New Jersey Revenue Division, and you'll be responsible for all the liabilities of your LLC.
How To Dissolve an LLC in NJ: Conclusion
If you are still unsure how to dissolve an LLC in New Jersey, it is vital to seek professional help. The process can be complicated to navigate without legal assistance.
A law firm like IncFile can provide the guidance and support you need to ensure the dissolution process goes smoothly.