11 Aug I pay fees to the state for my LLC. Should I keep it open?

Q. Earlier this year, I created a New Jersey LLC in anticipation of a consulting project that never materialized. What will my tax implications be for 2022? Would it be worth it keeping the LLC alive in case the slim chance of a future opportunity arises or would it be wise to dissolve it? About 15 years ago I had a New Jersey S-Corp and I was paying hundreds of dollars in New Jersey annual business registration fees even though my clients dried up and I wasn’t bringing in any revenue, so I dissolved my consulting firm.
— Unsure

A. We’re sorry to hear your consulting project never happened.

In these days of higher inflation, lots of people are looking to eliminate unnecessary expenses.

Let’s describe what an LLC, short for Limited Liability Company, does.

An LLC is a pass-through entity. This means that income flows through your LLC to your personal income tax return, said Jeanne Kane, a certified financial planner with JFL Total Wealth Management in Boonton.

So, she said, if the LLC doesn’t have income, it won’t owe income tax.

As you noted, it’s not free to keep the LLC.

“Each year that you maintain the LLC, you will have to pay an annual report fee of $75,” Kane said. “If you anticipate that you may have clients in the future, keep the LLC. But if you don’t anticipate any, it will cost you to dissolve your LLC.”

The cost to dissolve an LLC in New Jersey is $120, which consists of a $95 dissolution fee and $25 tax clearance certificate application fee, Kane said.

And if you want to register a new LLC if consulting materializes in the future, then you’ll pay $125 to set it up, she said.

So the key question you have to answer is how likely are you to get new consulting work.

“It’s going to cost you whether you keep the LLC or dissolve it,” she said. “If you don’t think that you’re going to get new business, why pay the annual fees to keep it? You can always set up a new LLC and pay the $125 should you have clients in the future.”

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This story was originally published on Aug. 11, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.