New Jersey has more restaurants per square mile than almost any other state, and its regulatory environment is among the most demanding in the country for business closures. The state has its own WARN Act, strict final paycheck rules, and a Division of Alcoholic Beverage Control process that can take months if you are not prepared. Here is what you need to know before you close.
New Jersey ABC License
New Jersey liquor licenses are issued by the New Jersey Division of Alcoholic Beverage Control. Unlike most states, New Jersey caps the number of liquor licenses by municipality -- one license per 3,000 residents for consumption licenses. That cap makes New Jersey licenses some of the most valuable in the country. A plenary retail consumption license in a desirable municipality can sell for $50,000 to over $500,000.
Do not surrender a New Jersey liquor license without first consulting a licensed broker. The license is a transferable asset and must be sold through the ABC's approval process, which typically takes 60 to 90 days. If you are closing and not selling the business, you can apply to place the license in safekeeping for up to two years while you find a buyer.
New Jersey Final Paycheck Law
New Jersey requires that final wages be paid on the next regular payday following termination under the New Jersey Wage Payment Law. Unlike California, New Jersey does not require same-day payment upon discharge. However, the state does require payout of accrued vacation if your written policy or practice has established that vacation is earned compensation. Review your employee handbook before the closing date.
New Jersey State WARN Act
New Jersey has its own WARN Act, and it is significantly more demanding than the federal version. Under the New Jersey Millville Dallas Airmotive Plant Job Loss Notification Act (NJ WARN), employers with 100 or more employees who lay off 50 or more employees within a 30-day period must provide 90 days' notice -- compared to 60 days under the federal WARN Act. New Jersey also requires severance pay of one week per year of service for each laid-off employee if the required notice is not given. For a restaurant with 50+ employees that closes without 90 days' notice, this severance obligation can be substantial. Most independent restaurants fall below the 100-employee threshold, but multi-location operators need to count all employees across all New Jersey locations.
New Jersey Sales Tax
File a final sales tax return with the New Jersey Division of Taxation. New Jersey's sales tax rate is 6.625%. Cancel your Certificate of Authority for sales tax collection. The Division of Taxation will issue a final audit if your account shows significant changes in the final months of operation.
New Jersey Business Dissolution
To dissolve a New Jersey LLC, file a Certificate of Cancellation with the New Jersey Division of Revenue and Enterprise Services. For a New Jersey corporation, file a Certificate of Dissolution. New Jersey requires that all state taxes be paid and all annual reports be filed before dissolution is approved. The state will issue a tax clearance certificate once all obligations are satisfied.
The Correct Sequence
Initiate the ABC license transfer or safekeeping application first -- it takes the longest. Notify employees per the NJ WARN Act timeline if applicable. Pay final wages on the next regular payday. File final sales tax return and cancel the Certificate of Authority. Obtain tax clearance from the Division of Taxation. File dissolution with the Division of Revenue. For the full cost picture, see What Does It Actually Cost to Close a Restaurant. For the lease negotiation, How to Negotiate a Restaurant Lease Buyout covers what to expect from New Jersey landlords.