Dissolving a business is a significant decision that business owners may consider at some point in their careers.
You may dissolve your business because of financial challenges, changing priorities, or because you achieved what you set out to do.
Businesses can also be dissolved on application to the Superior Court. In fact, New Jersey’s judicial dissolution procedures offer alternative remedies allowing partners, members, shareholders, and others to separate from the business without dissolving it.
If you are looking to understand how to dissolve an LLC, partnership, or corporation in New Jersey, or separate yourself from a business, Weiner Law Group LLP can help.
Our client base includes small businesses and Fortune 1000 companies alike, and we have decades of experience navigating complex business dissolution matters.
To get started, please contact us today.
What Is the Dissolution of a Business?
Business dissolution is the formal process of closing a business entity. It involves the legal steps required to cease the operations and existence of a business.
When you dissolve your business, you wind up its affairs, settle its debts, and distribute any remaining assets among the owners or shareholders.
Why Might a Business Be Dissolved?
By law, a business can be dissolved voluntarily or judicially. Judicial dissolution is sometimes known as involuntary dissolution.
Voluntary Dissolution
Reasons you might choose to dissolve a business vary by entity type, but are often similar. You can generally dissolve a business if:
- All partners, members, or shareholders agree,
- The business completes its undertaking, or
- An event triggers dissolution under the terms of the operating agreement.
Partnership Dissolution
You may dissolve a partnership in NJ if a partner in an at-will partnership provides notice of dissociation. Alternatively, you can end your partnership if a partner dies or dissociates and the remaining partners do not agree to continue the partnership within 90 days.
New Jersey LLC Dissolution
You may dissolve an LLC in New Jersey if the LLC has no members for 90 consecutive days.
Corporation Dissolution
Finally, you can dissolve a corporation that has no assets. Nonpayment of taxes or failure to file an annual report can also cause automatic revocation of incorporation.
Judicial Dissolution
Judicial dissolution looks similar, regardless of whether you are talking about the dissolution of a business partnership, an LLC, or a corporation.
Typical reasons you might file under New Jersey’s judicial dissolution procedures include:
- The company, members, directors, board, or shareholders are engaging in or have engaged in fraud or unlawful activities;
- The business can no longer complete its purposes;
- The business is not functioning properly;
- Business mismanagement; or
- Business leadership has oppressed members or shareholders or treated members or shareholders unfairly.
For example, a minority shareholder frozen out of management or denied dividends may file under judicial dissolution procedures.
The state attorney general can also dissolve a corporation when the corporation repeatedly acts outside the law.
When Might You Use New Jersey’s Judicial Dissolution Statutes?
Many members, shareholders, and partners use judicial dissolution statutes to request remedies other than the complete dissolution of a business. Under those statutes, the courts must generally order a resolution that is fair and equitable to all involved.
Appointment of Alternative Management
You can request that the court appoint a neutral custodian or provisional director or manager in lieu of dissolution.
The court must conclude such an appointment is in the best interests of the business. Appointees will be authorized to use the powers of a director, manager, or the corporate board to run the business.
Forced Buyout
When appropriate, the court may also order that the LLC or corporation buy out the interests of those complaining about mistreatment. Typically, this includes paying the fair market value of their interests.
This remedy may also be available in partnership actions. If you have multiple partners, you may be able to force a buyout unless the court concludes it is more equitable to wind up the business.
Dissolution
In some cases, dissolution may be the fairest action the court can take. You may want to seek dissolution when your business purposes can no longer be accomplished or the business is mired in controversy.
How to Dissolve an LLC, Partnership, or Corporation in New Jersey
How to Dissolve an LLC
To dissolve an LLC in New Jersey, you must follow your operating agreement, notify all members and creditors, settle outstanding debts, and file a Certificate of Dissolution (Form LLC-3) with the New Jersey Division of Revenue. This formal filing legally ends the LLC’s existence and protects members from future liabilities.
Steps to Dissolving a Business in New Jersey
The detailed steps to dissolve a business, such as an LLC or corporation, in NJ include filing the appropriate paperwork and winding up the business:
- Review the operating agreement. Your operating agreement typically outlines the process for dissolution and the terms and conditions under which the agreement can be terminated.
- Open communication. Begin a conversation with your partners to discuss your intentions and reasons for dissolution.
- File dissolution paperwork. Dissolving a business typically involves registering the dissolution, notifying creditors and settling debts, and liquidating assets.
- Notify relevant authorities. Inform the Internal Revenue Service (IRS) and the New Jersey Department of Revenue about the dissolution and file final federal and state tax returns.
- Address employee issues. If your business has employees, you may need to provide notice, offer severance packages, and handle any final payroll and tax obligations.
- Distribute profits and losses. In accordance with your agreement or state law, distribute any remaining profits or losses.
- Cancel licenses and permits. Cancel any business licenses and permits associated with the business to ensure you are not held responsible for future obligations.
If you voluntarily dissolve your business in NJ, you can choose how to undertake these steps within the limits of fairness and your agreements. If your business is judicially dissolved, you may have to follow court orders regarding how to undertake these steps.
Contact a New Jersey Business Law Attorney Today
Dissolution of a business in NJ requires careful planning, adherence to legal procedures, and open communication. Consulting with a qualified business attorney can help you navigate the complexities of dissolution successfully.
Experienced business dissolution attorneys can also guide you through filing under New Jersey’s judicial dissolution statutes, which allow you to seek alternative remedies and separate yourself or bad actors from your business without complete dissolution.
Weiner Law has been a well-respected and recognized name in the New Jersey legal field for over 40 years. Our experienced New Jersey business dissolution attorneys know how to give our clients the results-driven representation they deserve.
Contact us today for your initial consultation by filling our online form, or call us at (973) 828-8353.