A few years ago, a friend and I decided we wanted to get into business together

WebTool
WebTool

A few years ago, a friend and I decided we wanted to get into business together. We formed an LLC in New Jersey. After forming the LLC, we both became pretty busy and basically forgot about it. We never performed any business activities or filed anything after forming. So now, about 3 years later, I was looking into how to dissolve the entity. I see that I have to pay about $500 in fees to reinstate the business, then $125 more to file the dissolution paperwork. I'm also seeing that NJ charges LLCs a minimum $500 annual tax. As we've never done any business, we have never filed an annual report or paid taxes. So it looks like I'm looking at about $2,000 to get the entity up to date and pay back taxes. This sounds ridiculous to me as we never even did anything with it.

Would it be possible for me to just walk away from all of this? I'm worried that somewhere down the road, the unpaid taxes will continue to accrue and they'll come after me. Would it be better to just pay for my own stupidity and count this as a lesson learned?

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PurpleCharger
PurpleCharger

Help me Veeky Forums, you are my only hope

idontknow
idontknow

Yes, state could come after you. It will be a bitch fighting this down the road when the bill is $5000 with all penalties.

Snarelure
Snarelure

I have to pay about $500 in fees to reinstate the business, then $125 more to file the dissolution paperwork. I'm also seeing that NJ charges LLCs a minimum $500 annual tax. As we've never done any business, we have never filed an annual report or paid taxes. So it looks like I'm looking at about $2,000
That sucks... why don't you give the city a call and ask them what your options are

Skullbone
Skullbone

Yeah, i'm thinking it's better to just eat it. Could get a lot worse down the road with taxes owed and penalties.

SniperWish
SniperWish

I did, twice... ever try talking to the miserable fucks who work for the treasury? I was told to check the website lol. Basically you can't file any kind of paperwork until you're up to date on your payments.

AwesomeTucker
AwesomeTucker

Be done with it, have your partner pay half, that's what I'd do in that case

Fuzzy_Logic
Fuzzy_Logic

This thread is great example of the mistakes people make when they start a business. Great for teaching, this is. Not so great for OP.

Why did you need a LLC in the first place? You never adequately capitalized it, nor did it have the requisite separateness, so you'd never get any legal liability protection. All you did was waste your time and money.

Garbage Can Lid
Garbage Can Lid

I completely agree. At the time, we were making good money and thought that was the best path to take. We were young guys without much experience. Very dumb and like I said earlier...

Would it be better to just pay for my own stupidity and count this as a lesson learned?

That being said, I'm glad I gave you a chance to feel better about yourself today. I'm sure every decision you've made in your own life has been brilliant...

5mileys
5mileys

Don't get pissy just because I pointed out that you're a cautionary tale. You already got the answer you needed earlier in the thread, so the only thing that remains is to teach others not to make the same mistakes.

Crazy_Nice
Crazy_Nice

I only took 1 economics course in college, so forgive my arrogance, but doesn't LLC mean limited liability?

As in, "The government can attack your company/business all they want but your personal wealth and credit remains untouched"?

5mileys
5mileys

"limited"=/="none whatsoever"

kizzmybutt
kizzmybutt

Right, the company is already liable. It was my understanding that this is where the limit is drawn.

Can you elaborate?

Deadlyinx
Deadlyinx

doesn't LLC mean limited liability?
Yes, but the limitation of liability is not unconditional and not universal.

First, the officers/directors/founders of the LLC are always personally liable for registration costs, regulatory costs, and reporting costs associated with the creation and existence of the LLC itself.

Secondly, the officers/directors are often personally liable for any taxes owed by the LLC, especially so-called "trust fund" taxes (e.g., sales tax).

Third, and too often overlooked, is the fact that limitations of liability can be defeated by any creditor if the LLC was insufficiently capitalized for its business purpose, or if the officer/directors/management failed to keep the affairs of the LLC separate from the affairs of the individual. Creating the LLC itself just isn't enough. You actually have to fund the LLC, ideally into a separate bank account used solely for the LLC. The LLC should, ideally, have a separate address, phone number, stationary. Any money transfers to/from the LLC from its owners should be meticulous accounted and documented. This is generally referred to as maintaining the separateness of the corporate entity, and most people foolishly don't bother with these details only to find that they're personally on the hook under any number of legal theories (veil piercing, alter ego, substantive consolidation, etc.).

Sharpcharm
Sharpcharm

After all the reading I've done today this seems like a pretty good summary.

Thank you everyone for your input.

Heed my tale, young anons...

Firespawn
Firespawn

Good explanation anon

SniperWish
SniperWish

Can you elaborate?
not really,
this is an extremely common misunderstanding on Veeky Forums. I'm not sure where it came from. It's actually pretty childish.
but I have my SUPER PUPPY POWER SHIELD ON, you can't hit me with any LIABILITY, Joe!

talk to a lawyer if you're interested. LLC's protect from only very specific types of liability, most of which would be covered by your liability insurance anyways.

BlogWobbles
BlogWobbles

Lol

eGremlin
eGremlin

not really
That's alright - someone more competent than you explained it nicely here:

PurpleCharger
PurpleCharger

He skipped some pretty important parts.

you're still liable for anything you make your LLC do if it causes harm due to your malice or neglect.

an LLC provides 0 personal protection from liability you cause in its name.

Stark_Naked
Stark_Naked

you're still liable for anything you make your LLC do if it causes harm due to your malice or neglect.
You're now talking about personal liability for an officer/director separate from the limitation of liability that may be afforded by the corporation. I didn't leave it out; it's a different topic and a different form of liability.

an LLC provides 0 personal protection from liability you cause in its name.
This is a gross overstatement. An officer/director is generally not liable for the actions of the corporation, including liabilities incurred by the corporation. The exceptions are (a) direct participation in tortious conduct, and (b) breach of fiduciary duty (e.g., duty of care, duty of loyalty, duty of candor).

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