Starting a Business in NJ: What You Need to Know
If you’re planning on starting or restructuring a business in New Jersey, here is a guide on how to formally organize the business into a company. 5 min read
2. Develop a Business Plan
3. Registering Your New Business
4. Your Business Must Pay Taxes
5. Licensing and Permits
6. Check with Your Local County Office
7. Employee Issues
8. Work With a Financial Professional
If you’re planning on starting - or restructuring - a business in New Jersey, you’ll want to formally organize the business into a company. In New Jersey, the four basic options are: Sole Proprietorship, Partnership, Limited Liability Company, and Corporation. Each has its own advantages and disadvantages.
Legal Form of the Business
As stated above, there are four basic forms that businesses take. They are as follows.
- Sole Proprietorship
A sole proprietorship is the “default” for New Jersey businesses owned and operated by a single person. Sole proprietorships generally require less administrative hassle, as you don’t have to register as a business entity, execute various legal documents, or adhere to specific maintenance regulations. On the other hand, sole proprietorships do not shield you from liability in the event of a lawsuit or creditors.
A partnership is the “default” for New Jersey businesses owned and operated by multiple persons. Like sole proprietorships, they require less administrative hassle, but they will not shield the partners from liability in the event of a lawsuit or creditors.
- Limited Liability Company (LLC)
LLCs have become the most popular legal form for new businesses in New Jersey. LLCs must be registered, relevant documents must be executed (for example, Operating Agreement and/or Bylaws, though these are not required under NJ law), and certain maintenance tasks must be handled to ensure that the form is valid, but generally speaking, the law imposes few formalities on management of an LLC. LLCs also enjoy certain tax benefits (the pass-through taxation of a partnership) and provide a liability shield against lawsuits and creditors.
The corporate “C-corp” form has fallen out of favor in recent years. The law imposes quite significant formalities (management requirements, recordkeeping, voting, meetings, etc.), though the corporate form enjoys the liability shield that the LLC form also provides. Generally, the corporate form is used if the corporate tax benefits justify the inconveniences and inflexibility imposed by the law.
Develop a Business Plan
A business plan is essentially an outline that describes your business -- in past, present, and future terms. A solid business plan will detail, using data when appropriate,what your business does, past successes and failures, and what the goals are for the future.
The business plan should also reference or detail
The name of your business.
You can file a name reservation application with the NJ Department of Treasury ($50 fee). The name will be reserved for up to 120 days.
The product or service to be sold.
The location of the business.
The industry that defines your business.
A marketing strategy and branding, such as a logo.
The names and qualifications of those persons who will run the business.
It is best to think of a business plan as a dynamic work-in-progress. It will change over time, depending on the various successes and failures of the business, and depending on how the business itself pivots in terms of its product/service offering.
Registering Your New Business
All businesses are required to register for tax and employer purposes with the NJ Division of Revenue, even if the business does not intend to collect sales tax or to have employees. Registration must be initiated at least 15 days in advance of the business opening, so that there is sufficient time for tax law compliance.
Do bear in mind that all new locations of your business must be separately registered with the State.
The State of New Jersey will send you a New Jersey Complete Business Registration Package, which will collect various information on the nature of your business and any applicable taxes. If you indicated that you will be collecting sales tax, thereafter, the State of New Jersey will send you a New Jersey Certificate of Authority for sales tax. If there will be no tax liability, the State will inform you that your business need not be registered.
If you intend to incorporate, you must file Certificates of Business Formation. You will need to make sure that the name you want to use is available. If your business is for profit, the filing fee is $125. If you are starting a nonprofit organization, the filing fee is $75. Annual filing fees are $50, and corporations must pay a minimum $500 annual tax fee.
You can register your new business in person at the NJ Department of Treasury, online at www.NewJerseyBusiness.gov, or by regular mail, by completing form NJ-REG. Business registration requires a registered agent -- anyone can serve as the registered agent, though in most cases the registered agent is an attorney or a high-level manager working at the business.The registered agent will accept all legal documents on behalf of the company.
Though sole proprietorships and partnerships are not required to register as a new Business Entity, it is generally encouraged. If the sole proprietorship/partnership uses a trade name, however -- in other words, a business name that is not the name of the owner(s) -- then New Jersey law requires county trade name registration.
Your Business Must Pay Taxes
You need to have either a social security number or FEIN in order for the government to tax your business correctly. You will need to use this number on all of the business forms that you fill out during the registration process. This number is used when you file your business taxes to identify your specific business.
If you set up your business as a sole proprietorship, or even as a one person LLC, you can use your own personal social security number (SSN) for federal tax purposes. If your business is any other type, you must apply for a Federal Employee Identification Number (FEIN). File form SS-4 (to obtain your FEIN) with the IRS online, or by file it by mailing in your form.
Licensing and Permits
Depending on your industry and the impact of your business on employees and the environment, you may need to submit application forms to the relevant State agencies to confirm whether your business is subject to various licensing/permittance regulation (Occupational, Environmental, etc.).
Check with Your Local County Office
You may need to have certain local permits or licenses to legally operate your business. Check with your local municipal office to see what you need to run your business. There may also be local regulations unique to your city or county that apply to your business, so consult with an attorney to ensure that you are operating within the bounds of federal, state, and local law.
If you have at least one employee, you must register with the Division of Employer Accounts, New Jersey Department of Labor and Workforce Development, for unemployment insurance purposes. You must also have worker's compensation insurance to cover employees. Registering ensures that your employees are protected with unemployment benefits if they are no longer employed by you and qualify for benefits. You may also need to provide disability insurance for your employees.
Work With a Financial Professional
You’ll likely want to work with an accountant to ensure that all disbursements, payments, invoices, debts, and accounts are handled in a manner consistent with industry-standards. Your accountant is more than just a calculator, however. A great accountant will be able to advise you on whether it makes sense to open a business bank account, apply for certain loans, establish a business line of credit, and more.