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How do taxes relate to a New Jersey business dissolution?

It is not unusual for businesses in New Jersey to decide to cease operations. While those who begin a business will undoubtedly make certain that they are following all the rules to ensure full compliance and to avoid problems down the road, it must also be remembered that there are also rules for concluding a business via dissolution.

Corporations that do not want to have their corporate charter anymore have to inform the New Jersey State Treasurer. By doing that, the Corporate Business tax may be avoided as may penalties and interest. All corporations have to submit their New Jersey Corporation Business Tax Returns even if it has stopped operating or distributed its assets via liquidation and is still subject to the minimum amount required for taxes every year -- $500 -- until it has completed its dissolution. The Corporate Business Tax must still be filed even if the business is no longer in operation but has not dissolved.

When the Division of Revenue is given the articles of dissolution and all fees have been paid and the Division of Taxation has given the tax clearance, the dissolution will be viewed as in effect. There will no longer be any eligibility for tax benefits. Liabilities from the past will still be applicable and can be reviewed by the Division of Taxation. Without the dissolution procedures being completed and the necessary amount of outstanding liability paid, further collection action procedures will begin by the Special Procedures Branch, Judgment Section. The corporation will then receive letters demanding payment and possibly so will the corporate officers. Corporate officers who are responsible will be personally responsible for the trust fund taxes. The Superior Court of New Jersey will file a Certificate of Debt if what is owed is not paid. There will be a 10 percent fee for Cost of collection, and it will become part of the debt that is owed.

The following penalties will be assessed without a dissolution if there are outstanding taxes: 5 percent for the late payment penalty; 5 percent for the late filing penalty each month up to 25 percent; $100 per month in a late filing penalty; and for certain years, an amnesty penalty of 5 percent. The dissolution of a business is not a simple matter of ceasing operations and moving on. There are tax issues that must be confronted. Corporations should perform their due diligence with a business dissolution to avoid any tax penalties after the business is closed.

Source: state.nj.us, "Consequences of Not Dissolving a Corporation," accessed on March 14, 2016

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