1. Filing Requirements for Formation
2. NJ S vs. C Corporation
2.1. Tax Implications
2.2. Ownership
3. Ongoing Compliance

New Jersey corporation law provides the rules and regulations for corporations operating in the state of New Jersey. Particularly, the New Jersey Business Corporation Act defines a domestic corporation, along with the ongoing rules and requirements for properly maintaining a NJ corporation.

If you want to incorporate in NJ, you need not be a U.S. citizen or resident of the state. Anyone can form a corporation in the state so long as you plan on doing business there.

Filing Requirements for Formation

Like any state, NJ requires that the business file the articles of incorporation with the Secretary of State’s office. This is the main document that will include basic information regarding you and your business, including the company’s name, principal address, registered agent name/address, purpose of the business, date when the company will start doing business, how long the business will operate unless there is no approximate end date, whether or not you will sell shares, and the officers and directors names/titles.

When it comes to choosing a registered agent, keep in mind that the corporation cannot act as its own registered agent. Furthermore, the registered agent must physically reside in the state of New Jersey.

When you identify the number of shares being offered, you will need to specify the maximum amount of shares that each shareholder can have, if applicable. You will also need to identify how many classes of stock there are. Note that, if you want to operate an S corp as opposed to a C corp, you can offer only one class of stock and have a maximum of 100 shareholders.

Next, you’ll have to adopt corporate bylaws. While the articles of incorporation will require actual filing, along with the applicable filing fee, NJ doesn’t require filing of the corporate bylaws. However, the state does require that the company have initial meetings to adopt such bylaws, elect the officers, authorize shares if applicable, and make any other organization decisions.

Keep in mind that, when drafting the bylaws, the information must be consistent with whatever information was included in the articles of incorporation. Therefore, if the articles indicated that your company would be offering only one class of stock, then the bylaws must also indicate as such and cannot provide that more than one class of stock is being offered.

NJ S vs. C Corporation

There are some similarities and differences between NJ S and C corporations, particularly regarding the following:

  • Tax implications
  • Ownership
  • Ongoing compliance

Tax Implications

A C corporation is taxed twice – once at the corporate level and again at the personal level. More specifically, the corporation itself is subject to corporate taxation. Thereafter, any dividends that were paid to the shareholders will then be taxed again at the personal rate by each shareholder. However, S corporations operate similar to that of LLCs as pass-through tax entities. This means that the NJ S corp will pass its profits, losses, and expenses onto the owner-shareholders who then report it on their personal income tax returns.

The portion that is taxed by each shareholder will be dependent on how many shares each shareholder owns. The S corp will not be required to pay corporate taxes, but rather only an informational return that will identify the total amount of profits, losses, and expenses, and what portions will be passed through to the shareholders.

Ownership

When you initially form your NJ corporation, it will default to a C corporation unless you formally file IRS Form 2553 electing to be taxed as an S corp. However, not all businesses qualify as an S corp. In order to qualify, your business must:

  • Be a domestic corporation
  • Have only one class of stock
  • Have no more than 100 shareholders
  • Have shareholders that are only individuals, certain trusts, and estates

Ongoing Compliance

Since the S corp can have only a maximum of 100 shareholders and offers only one class of stock, the ongoing requirements for the S corp are less complex than some C corporations. The larger the company, the more complex the ongoing maintenance and upkeep can be. That’s because there could be additional tax implications, employer tax withholding requirements, sales franchise tax, etc.

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