What You Need to Know About Closing / Dissolving a Corporation or LLC in New Jersey
When a corporation has ceased doing business and the corporate charter is no longer desired, it is essential that the corporation be formally dissolved with the New Jersey State Treasurer through the Division of Revenue to avoid future liabilities for corporation business taxes and potential penalties and interest in the event annual tax returns are not timely filed. Every corporation subject to the New Jersey Corporation Business Tax Act, Chapter 162 Laws of 1945, as amended and supplemented (N.J.S.A. 54:10-A-1 et seq.), must submit New Jersey Corporation Business Tax (“CBT”) returns even if a corporation has discontinued business operations or has distributed assets in liquidation. A corporation registered in New Jersey remains subject to at least the minimum CBT tax ($500 per annum) from the date of its incorporation or authorization to do business in New Jersey until it legally dissolves through the New Jersey State Treasurer by the Division of Revenue. Failure to dissolve the corporation once it has ceased doing business will result in the legal requirement to continue to file annual CBT returns with the necessary remittance of (at least) the minimum CBT tax amount described above.
When the Corporate Dissolution is Effective in NJ
A dissolution shall be considered filed and effective as of the date the Division of Revenue receives the properly completed and executed Articles of Dissolution, payment of all fees, and a Notice of Tax Clearance issued by the New Jersey Division of Taxation. All business tax eligibilities for the corporation will cease as of the date the request for dissolution is received and accepted by the Division of Revenue. However, prior tax liabilities will still apply and be subject to the Division of Taxation’s review. Please note that if the corporation does not resolve prior tax liabilities due the Division of Taxation and a Tax Clearance Certificate is not issued, the business tax eligibilities will be reversed as if there was no lapse in the Corporation’s non-dissolved status.
Penalties if Corporation Dissolution Procedures Are Not Followed Properly
If dissolution procedures are not properly completed, and full payment of the outstanding liability is not received, the matter will be forwarded to the Special Procedures Branch, Judgment Section, for further collection action. Notice and Demand for Payment letters by the Division of Revenue will be sent to the Corporation and, in the event there is outstanding trust fund liability (for example, unpaid sales or employee withholding taxes), to its corporate officers. Responsible corporate officers (as defined by applicable statutes) will be held jointly liable with the corporation for any unpaid trust fund taxes. If the tax liability is not resolved, a Certificate of Debt will be filed in the New Jersey Superior Court against the corporation and any responsible officers. A 10% Cost of Collection fee is added to the docketed judgment amount and becomes part of the outstanding debt. A Notification of Judgment letter is thereafter sent to the corporation and responsible officers who are covered by the docketed judgment. Also, in accordance with N.J.S.A. 14A:6-12, N.J.S.A. 54:50-18 and other applicable provisions, any officer or director of any corporation who distributes or causes to be distributed any assets in dissolution or liquidation to him or herself and/or other shareholders without having first paid all corporation franchise taxes, fees, penalties and interest imposed upon said corporation, shall be personally liable for said unpaid taxes, fees, penalties and interest.
Differences For the Dissolution of an LLC in New Jersey
While the formal dissolution process as described above is required for any for-profit domestic or foreign corporation ceasing business operations in New Jersey the process is a bit less complicated for a Limited Liability Company (“LLC”) doing business in New Jersey who decides to cease operations. An LLC formed prior to March 20, 2013 may simply be canceled and terminated, effective as of the time the required cancellation/termination form is filed with the New Jersey Department of Treasury. A tax clearance certificate is not required for these LLCs as a prerequisite to be canceled/terminated, but the LLC will be required to file tax returns and pay any outstanding taxes due as a result of the LLC’s operations up to the date of its formal cancellation/termination.
Domestic LLCs formed on or after 3/20/2013 are, however, required to formally dissolve and terminate. Dissolution allows the LLC the opportunity to wind up their affairs before terminating. These LLCs also have the option to Dissolve/Terminate concurrently. In all cases, the business must be in good standing at the time the Certificate of Dissolution or Certificate of Termination is filed. The dissolution/cancellation/withdrawal status will be considered effective when all online information, payments and, in the case of for-profit corporations, tax clearance certificates have been received.