It follows that if you start a business, you may one day need to close it. Business dissolution is a common step in the lifestyle of a business and can occur for many reasons. Some owners close their business when it’s time to retire or move on to a new business venture. Sometimes you’ll want to close an unsuccessful business to avoid bankruptcy.
No matter the reason, whether your business is thriving or has lots of debt, it’s important to understand the process to dissolve a New Jersey business. If the government doesn’t know you’ve dissolved the business, it will expect taxes, annual reports, or license renewals. As an owner, member, or director, you could be individually responsible for any fines or penalties. Failing to dissolve the business could limit your future ventures or negatively impact your credit.
If you haven’t yet started your business, we are experts in formation, too. Visit our page to form a New Jersey LLC or start a New Jersey corporation. When you form your business with us, we’ll be here for you from formation to dissolution.
We understand that when you started your business, you weren’t thinking about what would happen when the business closed. Luckily, it’s easy to prepare for a New Jersey voluntary dissolution, no matter what stage your business is in. It’s important to establish a secure and thorough record of all company dealings, so you can access them when you need them. Consider keeping information on customer accounts, employees, taxes, and third-party contracts in one place. The work you do now will save you time and money when you want to dissolve the business.
The first step in dissolution is to value the business. Valuation will determine how much you have left to pay creditors, shareholders, and yourself after closing. Start by determining the value of everything the business owns: real estate, inventory, business goodwill, and every other asset. Gather the documents related to your business’s operations, especially contracts with third parties and tax information. When you use our Worry-Free Compliance Service, you’ll have access to our dashboard that will keep your business documents organized to make gathering this information easier. If you’re not sure how to value things, don’t be afraid to hire a professional.
Once you have an idea of the value of your business, you’ll compile a full account of your business’s debts. You’ll want to know how much and who you owe. Consider all suppliers, lenders, and delivery services you have contracts with. Just because you’re closing the business doesn’t mean the debts go away. If the debts aren’t paid, you may face legal repercussions.
Members or owners can be personally liable for the company’s debts, even in a corporation or LLC. Shareholders can sue to reach the directors’ or officers’ individual assets through a legal process called “piercing the corporate veil.” If you want to dissolve your business the right way, you’ll need to understand the business’s debts and how to pay them.
Once you understand the business’s financial situation, the next step is to start the official dissolution process. When you formed the company, you likely filed documents with the New Jersey State Treasurer through the DORES of Revenue and Enterprise Services (DORES). If you want to dissolve a corporation, you’ll file another document with DORES, known as Articles of Dissolution.
If you’re dissolving an LLC in New Jersey, there are two documents to file. First, an LLC will file a Certificate of Dissolution to inform the state it intends to dissolve. Then, when the LLC has wrapped up, it‘ll file a Statement of Termination — which cancels its Certificate of Formation. Along with the dissolution document, all businesses need to file an Application for Tax Clearance Certificate and an Estimated Summary Tax Return. When you file online, DORES will prompt you to fill out these forms. If you want to file by mail or in person, you’ll print these to accompany your filing.
When you started your business, you likely created an operating document that included instructions for dissolution. LLC members will look to its operating agreement, and corporate directors and officers should review the bylaws. If your company doesn’t have an operating document, you’ll follow the default instructions in the New Jersey Business Corporation Act or the Revised Uniform Limited Liability Company Act. If you’re still in the formation stage, we offer an LLC Operating Agreement Template, which can set you up for a simpler dissolution process. No matter what your operating agreement or corporate bylaws say, you still need to file the proper dissolution paperwork to officially dissolve the business.
Remember all those licenses and permits you applied for to operate your business in New Jersey? Because some licenses and permits might automatically renew, you’ll want to close any that your business holds. You’ll need to research licenses at the state, local, and federal levels. Be careful not to forget any federal industry-specific licenses, as well as things like zoning permits or business activity licenses obtained through your municipality or county.
Next, you’ll wrap up the business’s legal and financial obligations. In New Jersey, you need to file the business’s annual return and check the box indicating a final return. The business must pay all corporation franchise taxes, fees, penalties, and interest before it can make any distributions. DORES won’t accept your dissolution until the business is “Active and in Good Standing.” You’ll also need to cancel the business’s federal EIN and file final tax returns with the IRS.
If the business has employees, make sure you follow federal and state laws regarding employee payments and other benefits. You’ll close your tax and employer accounts and file a final wage reporting with DORES. You’ll pay final unemployment, workforce development, temporary disability, and family leave insurance contributions. Additionally, New Jersey has special notice requirements for large employers known as The Worker Adjustment and Retraining Notification Act (WARN). You’ll need to follow WARN if you’re closing a plant or laying off 500 or more employees or 50 or more employees making up 33% of your workforce.
The final step is to file Articles of Dissolution or a Certificate of Dissolution with DORES. DORES considers dissolution effective on the date it receives the dissolution document and the Tax Clearance Certificate from the Department of Taxation. In addition to naming the company’s registered agent, directors, and officers, corporations need to provide the text of the board resolution authorizing the dissolution, a description of the shareholders meeting, and the number of shares voting for and against the dissolution. An LLC has to provide the members’ names in the Certificate of Dissolution. Once the LLC has wound up, the LLC files a similar Statement of Termination to cancel the Certificate of Formation.
Starting and running a business is exciting, but often stressful. No matter where you are in the lifecycle of your New Jersey business, you need to make sure that you take care of all compliance requirements. We can help. Take a look at our full slate of formation and compliance tools and services to see how we can make it easier for you.
Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Our experts have put together this list of simple steps for you to dissolve a business in New Jersey. You’ll start winding up your business’s affairs by valuing the business and identifying its debts. Then you’ll identify the dissolution documents for your business type, cancel your licenses and permits, and wrap up any final legal and financial obligations. Finally, you’ll file Articles of Dissolution or a Certificate of Dissolution with DORES.
You need to pay a fee to the Department of Revenue to file your Certificate of Dissolution and Certificate of Termination. You’ll also pay a fee to the Department of Taxation for a Certificate of Good Standing. In addition, you’ll pay for final annual reports or taxes.
How long it takes to dissolve your LLC in New Jersey will depend on your company’s unique circumstances. Because valuing the business and taking care of any debts is a big step, a larger company typically takes longer to dissolve than a smaller one. When you file a Certificate of Dissolution with DORES, the document takes effect immediately.
Nonprofit corporations wind up the business by filing a Certificate of Dissolution with DORES. The Secretary of State will forward a copy to the Attorney General to alert them of the nonprofit’s dissolution.
New Jersey Business Resources
Business Dissolution by State