Here’s what you need to know if you want to end a partnership, limited partnership or limited liability partnership organized in New Jersey.
The law regulating partnerships in New Jersey is the New Jersey Partnership Act 1996, Title 42, New Jersey Revised Statues §1, et seq.
The first step is to review the partnership agreement to ensure that the partnership is ended in accordance with the provisions of the agreement.
Carefully review all contractual obligations, such as leases or loan agreements that will be affected by the dissolution of the partnership. Many, if not most agreements, require the consent of the counter-party to modify, assign or terminate the agreement. If an agreement permits early termination, take care to provide timely notice in strict accordance with the notice provisions in the agreement. Most loan agreements require the consent of the lender to modify or assign the loan. While many loans permit pre-payment, they may also impose a pre-payment penalty.
Pay all outstanding liabilities, or make provision for their payment. When filing for a certificate of withdraw, the partners must certify to the state that all debts have been paid, or that the partners have made adequate provision to do so.
Decide whether one or more of the partners will continue the business of the partnership after the dissolution. If the answer to that question is “no”, the assets of the partnership must be valued and then distributed to the partners in kind, or sold and the proceeds distributed, in accordance with the terms of the partnership agreement.
If the business will continue, the partners will have to decide which assets will be sold, and which distributed; and whether the continuing partners will be permitted to use the name of the partnership, its telephone number, social media accounts, website and other intellectual property.
After the partners have resolved the matters described above, the partnership must file final tax returns with the state and federal governments and pay all taxes then due.
The final step is to file a certificate of dissolution with the New Jersey Department of the Treasury, Division of Revenue and Enterprise Services. The filing fee is $100.00. The certificate of dissolution will not issue until the Division of Revenue and Enterprise Services issues a tax clearance certificate.
A well-drafted partnership is key to a smooth and speedy dissolution. If you need a partnership agreement; want to review an existing agreement; need to dissolve a partnership, or just have a question, contact me at (732) 988-5362.