NJ Corporation Dissolution: Obtain Protection from Liens

If you are the President, Secretary, Treasurer, or Director of a New Jersey Corporation, then it is likely that you will have to dissolve your corporation. Dissolving a corporation in New Jersey can be done by filing Articles of Dissolution with the Division of Revenue and Enterprise Services (DRE) pursuant to N.J.S.A 54:10-1 et seq.

The filing fee for dissolution is based on the number of authorized shares listed in the Certificate of Incorporation plus an additional $5 service charge per share not to exceed $500 or 1% of the gross value of all shares payable in cash whichever sum is lower.

What Does It Mean to Dissolve a Corporation?

Dissolving a corporation means that the business of the corporation is brought to an end. A dissolved corporation no longer exists as a legal entity, but it may still have some obligations or liabilities that are outstanding.

Dissolution should not be confused with a reorganization, where shareholders vote to change the form of their business organization by creating another type of entity under New Jersey law (e.g., limited liability company or limited partnership).

New Jersey Law Requires Corporations To Be Dissolved After The Following Events Have Occurred:

  1. If you wish to dissolve your corporation after having filed Articles of Organization
  2. If you wish to dissolve your corporation after selling all its remaining assets and distributing the cash received among its stockholders;
  3. If you wish to dissolve your corporation after paying all of its debts and distributing the cash received among its stockholders.

How to Dissolve a New Jersey Corporation by the Board of Directors?

The board of directors may dissolve the corporation without shareholder approval. The board should pass a resolution approving dissolution and specifying that fact in its minutes.

No advance notice to shareholders is necessary unless the board’s action provides for sending the articles of dissolution to the shareholders at a later date.

If you intend to dissolve your corporation by having your directors vote to dissolve, then you must take care not to lose quorum at the meeting since only stockholders who are entitled to vote to have quorum rights under N.J.S.A 14A:6-1(c).

How to Dissolve a New Jersey Corporation by the Incorporators?

If your corporation was originally formed by the incorporators and not the board of directors, then you should pass a resolution to dissolve and file articles of dissolution with DRE.

What are the Procedures for Dissolving a Corporation?

  1. If Articles of Organization were filed with DRE, then you must prepare an Application for Certificate of Dissolution (form BOA-100). Your corporation’s name will be struck from our records when its Certificate of Dissolution is issued or after 120 days, whichever occurs first.
  2. After documents are prepared and approved, send them to DRE along with the fee described in N.J.S.A 54:10-3(d)(5). Please note that the documents must be typed if the corporation had more than five shareholders or authorized shares of stock. If your articles of organization were filed with DRE as a standard (extended) filing, then please note that only one signature is required.
  3. After your application and fee are submitted, you may prepare an affidavit describing how the dissolution was handled, including who received cash dividends on stock, what happened to other assets, and whether any debts remain unpaid and will continue to remain unpaid.
  4. File proof of publication requirements: The Division requires proof that notice of dissolution has been published in accordance with N.J.S.A 54:10-7: (a). A certificate from the newspaper that notice was required is sufficient, or; (b). A letter from the newspaper publisher providing the date of publication and the name of the newspaper
  5. You must send a copy of your Certificate of Dissolution to each director, officer, agent, transfer agent, and registrar for any securities held in escrow by your corporation. It should be sent to all these people together with a cover letter requesting that they update their records to show that your corporation has been dissolved.

What are Possible Outcomes if an Unauthorized Person Fails To File Articles Of Dissolution?

To recover certain benefits (e.g., reinstatement after administrative dissolution), you may have to establish that your corporation was properly dissolved. Unfortunately, your corporation does not automatically cease to exist:

  • if no dissolution documents are filed
  • if the wrong type of document was filed.

If DRE sends you a letter asking why your dissolution hasn’t taken place, then you must act on it without delay.

What is the Penalty for Failing To Dissolve A Corporation?

If, after receiving our request for an explanation, we determine that your corporation has failed to dissolve properly or at all, then we may take further action, including filing articles of involuntary dissolution against your corporation with New Jersey Superior Court located in Mercer County:

  1. Failure-to-file is a per se ground for involuntary dissolution, and thus no actual injury need be shown;
  2. The Superior Court may order that the corporation be dissolved and that its directors, officers, agents, transfer agents, and registrar for any securities held in escrow by your corporation be barred from holding a similar office unless they establish good cause why such relief should not be ordered.

Tax Clearance

Please note that a dissolved corporation may need to obtain tax clearance from your city, state, and federal government. For example, if your company still has outstanding sales taxes or payroll withholdings with the State of New Jersey, then you may not be able to dissolve until those issues are resolved.

In some cases, a business can continue to file with DRE during the dissolution process. Filing for a new license is unnecessary as long as all required filings have been made for an existing entity. Please refer to the chart entitled “Filing Requirements” found on our website at www/njtaxation .state.nj.us

Certificate of Dissolution

Requirements:

  • Please note that you can file a Certificate of Dissolution electronically or by mail. However, if your articles of incorporation were filed as an extended filing, then there must be a signature on each page following the words “IN WITNESS WHEREOF.”
  • In addition, the certificate must include the date dissolution was completed and how it was handled, including who received cash dividends on stock, what happened to other assets, and whether any debts remain unpaid and will continue to remain unpaid. Please note that the fee for filing a Certificate of Dissolution is $135
  • Finally, please remit payment to the State of New Jersey – Division of Taxation at PO Box 308-E Trenton, NJ 08646-0308.

What if I Fail to File A Certificate Of Dissolution?

If you fail to file a certificate of dissolution within 90 days, DRE will administratively dissolve your corporation without notice to you (N.J.S.A 54:10-3(d)(1)). If you then want to dissolve your corporation properly, you must do so within two years after administrative proceedings are closed (N.J.S.A 54:10-3(e)c).

Filing for an extension is not permitted. You will be fined $50 per month that your corporation remains dissolved or which its certificates of the election are not filed (N.J.S.A 54:10-3(d)(3))

Notice to Creditors and Other Claimants

At a meeting of the board of directors, a resolution authorizing dissolution will be adopted.

If your corporation elected to have a board in its certificate of incorporation, then you must inform shareholders with voting rights by either sending a notice or posting information on an Internet website for which you are responsible.

In fact, any officer or director has a duty to notify interested parties by providing formal notice.

Out-of-State Registrations

Please note that articles of dissolution of foreign corporations cannot be filed for a corporation that has not had its certificate of authority to transact business in another state revoked.

For example, if your company still holds an out-of-state registration, then you may not be able to dissolve until the other state revokes your authority to do business there.

Is there a fee to dissolve or cancel a New Jersey Corporation?

Please note that there is no fee to dissolve or cancel a New Jersey corporation. However, there is a $50 late fee per month for failing to file your certificate of dissolution on time.

If you are filing by mail, please remit payment to the State of New Jersey – Division of Taxation at PO Box 308-E Trenton, NJ 08646-0308

Do you need a Division of Taxation clearance before the New Jersey Division of Revenue will accept your dissolution?

No. There is no need to obtain the Division of Taxation clearance before filing your certificate of dissolution with the New Jersey Division of Revenue.

How do you obtain a tax clearance certificate in New Jersey?

You can search for your Division of Taxation clearance status on the website at www.njportal.com/DivisionofTaxation.

  • Please note that you must enter your corporation’s name in all caps, without punctuation or spaces (for example, ABC CORPORATION)
  • Once the website loads, click on “search” and then type in either the entity ID number or corporation name.
  • The name is keyed based upon the way it appears on legal documents filed with DRE.
  • If you do not know these numbers, please call 609-292-6400 x3422 to obtain this information for an additional $25 fee.
  • The department charges $25 for research time required to locate any entity record, including tax clearance.

How do you file for a Division of Taxation Clearance Number?

If you are the person authorized to dissolve your corporation, you can obtain a Division of Taxation clearance number by filing form NJ-CLR-1 with DRE. The fee is $25.00 per business entity plus one cent ($0.01) per page required for certificate copies requested at the time of request divided by 100 (rounded up or down).

If you are seeking an exemption from this fee based upon financial hardship, please include documentation supporting your claim, such as recent bank/stock loan statements, business license renewal statement(s), estimated summary tax return, federal income tax return showing net earnings, credit card debt statements showing monthly payments and cash available to pay bank loan(s), etc.

Also, if there is a corporate income tax liability from the latest return required to be filed, then you must either provide your credit card number or a check for this amount at the time of filing.

What if I want to dissolve avoided/revoked corporation?

Please note that if your corporation’s certificate of incorporation was revoked, then you must first file a certificate of legal existence before the Division of Revenue will accept a Certificate of Dissolution.

  1. Before filing form NJ-CLR-1, you must provide evidence to support your request for reinstatement.
  2. If the revocation was based upon the failure to file an annual report or corporation franchise tax returns, please include documentation showing when these outstanding annual reports are due for reinstatement.
  3. Once reinstated, the corporation is subject to any outstanding taxes, fees, and penalties at that time.
  4. Also, if there is a corporate income tax liability from the latest return required to be filed, then you must either provide your credit card number or a check for this amount at the time of filing.
  5. Please note that if your corporation’s certificate of incorporation was voided for failure to file a required statement, then you must first file a new Certificate of Incorporation before the Division of Revenue will accept a Certificate of Dissolution.

What are the tax consequences when dissolving or canceling my New Jersey Corporation?

When dissolving or canceling your corporation, there may be certain tax liabilities and obligations. It is suggested that you consult with your Certified Public Accountant (CPA) or attorney to see if you are subject to any tax liabilities.

What is an “Annual Certificate of Dissolution?”

The Annual Certificate of Dissolution serves two purposes.

  1. First, it notifies the Department of Revenue that your corporation will no longer conduct business in New Jersey.
  2. Secondly, it provides an opportunity for corporations conducting business in other jurisdictions to file a certificate showing they have filed dissolution documentation with their state(s) or jurisdiction(s).
  3. Only one Annual Certificate of Dissolution is required for each corporation, and it can be filed at any time during the calendar year.
  4. Please note that you are not required to file an Annual Certificate of Dissolution if, under your new Articles of Incorporation or Restated Articles of Incorporation, your new corporation will have exactly the same name as shown on your current Annual Certificate of Dissolution.

How long does it take the state to process the filing in New Jersey?

It generally takes up to two weeks for us to process the filing. However, if there are any outstanding corporate not-ices or certificates, the processing will be delayed until these items are received.

What type of legal documentation is required?

Any document filed with the Division of Revenue must include a certificate authorizing payment by your financial institution that is separate from the check used to pay your filing fee.

If you are unable to obtain this separate certificate authorizing payment by your financial institution, then please submit your request in writing so we may evaluate whether an exemption may be granted given your circumstances.

Can you revoke the dissolution of a New Jersey corporation?

The Division of Revenue will accept a Certificate of Revocation from the corporation stating it wishes to rescind its previous filing. However, a new Certificate of Incorporation must be submitted if the corporation wants to continue doing business in New Jersey.

Can I file for dissolution or cancel by mail?

Yes, you may mail your documents, along with a check made out to “State of New Jersey.” Please include your company name on all documentation that is being mailed to our office. Also include an email address where you would like us to send confirmation that we have received and processed the filing.

How long before someone can take your business name?

There is no time limit before someone can file in the Division of Revenue for a business name that was formerly used by your corporation.

However, if you would like us to reject any business name filings that may infringe on your former company, please send us an email with your formation date, and we will add it to our proprietary database, which we use to screen new business names.

Does my New Jersey Corporation need to be active or in good standing when I dissolve it?

No, even if your corporation is currently inactive or not in good standing, you must file a Certificate of Dissolution. If your corporation owes outstanding tax liabilities at the time the filing is processed, then these taxes must be paid immediately upon dissolution. Failure to remain in good standing for the current or prior fiscal year may result in the assessment of penalties and interest.

How do I dissolve the corporation after being notified that my annual report is late?

You can either pay all outstanding fees or file a petition with the New Jersey Superior Court, where you are located. Once this process has been completed, submit an email to us at [email protected] identifying yourself as one of the parties on record with New Jersey Superior Court requesting if we must accept your filing.

What happens if my corporation owes taxes when I dissolve it?

If at any time your corporation owes back taxes to the Division of Revenue, then the dissolution cannot be processed until all outstanding fees/taxes are paid in full according to the state’s online tax system.

How do I cancel my EIN#?

Once your corporation is dissolved, please complete and submit IRS Form 8822-B ( http://www.irs.gov/pub/irs-pdf/f8822b.pdf ) indicating that you wish to close your employer identification number.

This form can either be faxed(609) 633-0041 or emailed ( [email protected] ). You will receive an email confirming the cancellation of your employer identification number.

Is there a fee for canceling my EIN#?

No, there is no fee to cancel your New Jersey employer identification number. However, you will need to pay $50 to the Internal Revenue Service (IRS) if you wish to close your federal employer identification number.

What are the late fees and penalties to re-register if your registration is forfeited?

Let’s say you failed to file your New Jersey LLC annual report in the year 2014. The fee for filing that late report is $50. If you are late again, the penalty doubles to $100, plus there are additional fees of $200 per month until it is filed.

Conclusion

The process of dissolving/canceling a corporation in New Jersey is fairly simple. All you have to do is follow what the instructions say and mail all your documents with proper payment to the NJ Division of Revenue. If you need help, you can always find some services of a law firm for legal advice.

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