Basics of LLC Dissolution
Once you open an LLC in NJ, it is officially registered with the state, so you need to follow specific steps to close it. LLC dissolution officially shuts down your New Jersey limited liability company by canceling its legal entity existence and ending its contracts, assets, and liabilities.
Types of LLC Dissolution
Voluntary, administrative, and judicial are the 3 different dissolution types.
Each type applies to a different reason for dissolving an LLC. The most common type of LLC dissolution is voluntary.
Administrative Dissolution
New Jersey’s Division of Revenue and Enterprise Services can revoke an LLC’s certificate of formation if the LLC stops filing its annual reports. A revoked LLC can apply for reinstatement by filing the missing reports and paying a $75 reinstatement fee.
Judicial Dissolution
A member can ask the New Jersey Superior Court to dissolve the LLC if its activities are unlawful, if it’s no longer reasonably practicable to run it under its certificate of formation and operating agreement, or if the people in control have acted illegally, fraudulently or oppressively in a way that directly harms that member. The court can also order a remedy short of dissolution, such as appointing a custodian or ordering a buyout (N.J.S.A. 42:2C-48).
Voluntary Dissolution
When LLC members agree to end their business, this is voluntary dissolution.
Voluntary dissolution occurs for many reasons, such as internal member disputes on how to run the LLC, an economic downturn, or an event named in the operating agreement. A member’s death or departure doesn’t dissolve a New Jersey LLC unless the operating agreement says it does.
Dissolving Your LLC in New Jersey
Each U.S. State has specific steps and rules for voluntarily dissolving an LLC.
In New Jersey, dissolving an LLC requires filing a Certificate of Dissolution and, once winding up is complete, a Statement of Termination. After dissolution, the LLC can continue only to wind up its affairs.
Step 1: Vote to dissolve your New Jersey LLC
Unless your operating agreement says otherwise, New Jersey law requires the consent of all members of a multi-member LLC to dissolve.
The law doesn’t require a meeting; written consent signed by every member works, but follow any voting procedure in your operating agreement.
Single vs multi-member LLC dissolution:
Single and multi-member LLCs must follow the same New Jersey rules for dissolving an LLC; the only difference is a single-member LLC does not need to vote to close the business.
Dissolution rules in your LLC operating agreement:
Your New Jersey operating agreement should contain the specific steps to dissolve your business.
Members must refer to the LLC operating agreement before voting for dissolution to ensure their reason for closing the business complies with the operating agreement’s terms.
Operating agreement dissolution rules can include the following:
- The voting schedule.
- The percentage of members who are required to agree on dissolution.
- The procedure for closing the LLC’s activities.
- The procedure for paying all LLC debts and other liabilities.
- Asset distribution amongst members.
New Jersey’s default dissolution rules
LLCs whose operating agreement doesn’t address dissolution must follow the New Jersey state rules for dissolving an LLC.
Under New Jersey law, an LLC dissolves when (N.J.S.A. 42:2C-48):
- An event named in the operating agreement happens.
- All members consent.
- The LLC has had no members for 90 consecutive days.
- A court orders dissolution.
Step 2: Wind up all business affairs and handle any other business matters
Winding up your LLC means ending all its business activities per your operating agreement and New Jersey State law.
Under New Jersey’s LLC Act, you must take several essential winding-up steps to close your business; those include:
- Finalizing LLC debts, obligations, and other LLC liabilities.
- Resolving internal or external disputes.
- Ending any LLC contracts and activities.
- Canceling your LLC business licenses or permits.
- Closing your LLC business bank accounts.
- Transferring any LLC property.
- Paying all the LLC outstanding debts.
- Distributing LLC assets.
- Keeping your registered agent in place until your dissolution filings are complete.
Step 3: Settle debts and assets with creditors
After dissolving, your LLC can send written notice to known creditors and publish a notice in a newspaper in the county of its principal office. Claims not brought in time are then barred; for a published notice, claimants have five years (N.J.S.A. 42:2C-50 and 42:2C-51).
Pay or make provision for all debts before distributing anything to members; doing so fulfills your New Jersey State LLC requirements and protects you against personal liability after you close your business.
Step 4: Notify Tax Agencies and settle remaining taxes
A crucial step in winding up your LLC is notifying state and federal tax agencies of its closure and paying all remaining taxes.
New Jersey doesn’t require a tax clearance certificate to dissolve an LLC. However, your LLC must be in good standing, with all annual reports filed, before you can file online.
After you pay all outstanding taxes, you can submit a Certificate of Dissolution and a Statement of Termination.
Use the following links to wrap up your New Jersey tax and annual report obligations:
- File your annual report: Here
- File your last tax return: Here
- Cancel your New Jersey tax eligibilities: Here
Step 5: File a Certificate of Dissolution
You have 3 options for filing your Certificate of Dissolution: online, by mail, or in person.
All 3 require your LLC to be in good standing, and you’ll need your 10-digit Business Entity ID and the month and year your LLC was formed.
Use the New Jersey Business Endings and Cancellation Service to dissolve your LLC online. Online, choose “Dissolve” if the LLC still needs to wind up, or “Dissolve and Terminate” if it has stopped all activity.
By mail or in person, file a Certificate of Dissolution with the New Jersey Division of Revenue and Enterprise Services. The paper form is now available through the state’s Annual Reports and Change Services portal.
Division of Revenue and Enterprise Services contact information:
NJ Division of Revenue and Enterprise Services
PO Box 308
Trenton, NJ 08646
Phone: (609) 292-9292
Filing fees:
- State filing fee (domestic LLC): $100
- Online credit card convenience fee: $3
No tax clearance fee applies to LLCs. Make checks payable to “Treasurer, State of New Jersey.”
Conclusion
Dissolving your New Jersey LLC requires several steps before the State approves your dissolution application.
Most of those steps help you pay your LLC debts and tax requirements; some remove your financial liability after closure, and others ensure you remain in good standing with the state, allowing you to start another LLC if and when you want to.
FAQ
You might want to dissolve your New Jersey LLC for many reasons, including internal member disputes, increased market competition, or retirement. The reason doesn’t matter; what matters is you dissolve according to the operating agreement and New Jersey dissolution rules.
Not dissolving your LLC can cause financial liabilities, including annual New Jersey and federal tax payments, fines, and debts for failing to pay those taxes.
The Division of Revenue and Enterprise Services charges $100 to file a domestic LLC’s Certificate of Dissolution, plus a small convenience fee if you pay by card online. LLCs don’t need a tax clearance certificate.
You can dissolve your LLC online using the New Jersey Business Endings and Cancellation Service.
Online filings are usually processed quickly. Mailed filings take longer, and expedited over-the-counter service is available for an extra fee.