Legal Question in Business Law in New Jersey

Corporate Dissolution

I incorporated and registered a business in NJ back in Fall of 2001. I had done absolutely nothing with the business until November 2003, when I requested an EIN. It was a small job for $1000. In May of 2004 I attempted to

dissolve the corporation. I filed both a State and Federal return indicating that the business had lost money attempting to startup, thus paying no tax. All of this occurred as I held a full time job with an employer.

Since, I had done nothing with the business in the prior years, I never filed returns. Both Federal and State requested that I back file returns for those years, which I had done.

Upon dissolution, the State requires a Tax Clearance Certificate from the State Accounting Office (something along those lines). They denied the Tax Clearance Certificate and indicated that I owed the ''minimum tax'' plus interest and penalties. I consulted a CPA and he indicated that I should do nothing and forget about it, that it would eventually go away. I followed up

on the law and it indicates that the State can hold me personally liable for all the back tax, interest, and penalties (Link http://www.state.nj.us/treasury/taxation/text/condissolvtxt.htm).

I do not have the funds to pay this. Advice?


Asked on 5/05/05, 9:26 pm

1 Answer from Attorneys
Walter LeVine Walter D. LeVine, Esq.

Re: Corporate Dissolution

Apparently you were unaware that in NJ, there is a minimum tax on corporations, even if they are inactive and conduct no business, and there is an Annual Report fee that is also paid each year, again, even if the business is inactive. These minimums are $500 for the corporation and $50 for the A/R, so $550 is due for each year of the corporate existence, or portion of a year. The numbers are slightly different for 2001 and 2002, but the amounts are irrelevant. To formally dissolve, you must pay all back and current amounts, or a formal dissolution will not be allowed. To my knowledge, only the Annual Report fee has personal liability, not the corporate franchise fee. Plus, failure to pay the A/R fee also allows the state to impose a surcharge for each year, significantly larger than the actual fee. I suggest at least paying the overdue A/R fees (to avoid personal liability and the surcharge) and let the State revoke the corporate charter for non-payment of the franchise fees. It is possible they changed the laws on personal liability for the franchise fees, when the increased them. You could check this at the NJ tax web site.

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Answered on 5/06/05, 11:12 am


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