Choose a name for the business and do a search of name availability
Choose the type of business entity (proprietorship, limited liability company, corporation)
Register the business with the New Jersey Division of Revenue
Get a Federal Employer/Tax ID number (EIN Number)
Register with the New Jersey Division of Taxation
Open a bank account and obtain a business credit card
- Business Plan
While not legally required, most analysts suggest that an initial step for entrepreneurs or others considering starting a business is to prepare a business plan. The plan can be a useful tool in helping to focus the goals of the business; its needs to insure success; and a benchmark to measure progress. The plan also may serve as a document available to potential investors, lenders, suppliers and distributors to help evaluate the business and build credibility in the venture.
Suggested components of a business plan include:
What is the principal product or service of the business?
Who will run the company and what makes them qualified through experience or education to do so?
What problem or need does the product or service solve which is not currently met?
What is the size of the existing or future customer market?
How will the company promote and sell its products or services?
What is the cost of starting and operating the business in relation to current and future revenues?
Who are the competitors and how will the company maintain a competitive advantage?
What are the risks and threats confronting the business in such areas as regulation, litigation, technological change or other issues?
Perhaps the most important component of the business plan is the financial profile, both in startup and continuing operations. This should outline projected expenses and profits, including the costs of employees, inventory, and equipment; sources and amount of startup and operating revenue; and whether it will be necessary to seek additional funding from investors or lenders. Studies of new business formations often point to failures in estimating the extent and sources of capital and operating revenues as the most common reason for business failures.
In addition to a business plan, the founder or founders should also consider drafting an operating agreement, particularly when there are more than a single principal involved in operations. The operating agreement should define how and who will be responsible for making major decisions, thus reducing the potential for future disagreements in operation.
After drafting the plans, it can also be helpful to circulate them to those trusted by the founders of the business, particularly those with business, legal, accounting or financial backgrounds, to obtain feedback on the goals, structure and operation of the business and their evaluation of its potential success. * Write Your Business Plan, US Small Business Administration
The options for forming a business in New Jersey are 1) a proprietorship or partnership; 2) a limited liability company (LLC); and 3) a corporation.
Sole Proprietorship- A Sole Proprietorship is the simplest form of doing business, which describes businesses begun by an individual, either alone or with partners, to operate a business without forming a new legal entity. A partnership functions in much the same way, except the founder and others are owners together and equally liable. Legally, the individual or individuals and the business are treated as one person. The major disadvantage of the sole proprietorship is that the owners are held legally responsible and personally liable for any business activity, debt or wrongdoing. It also may be more difficult for businesses operated as proprietorships or partnerships to obtain financing or enter agreements with other business entities such as suppliers or distributors.
While proprietorships and partnerships do not need approval before commencing operations, the founders are still required o register the trade name of the business with the state or their county; file the business’s formation documents with the New Jersey Division of Revenue; and ensure that its operation complies with any other requirements, such as professional licensing or local land use and zoning regulations. New Jersey Sole Proprietorships or Partnerships do not have to register with the New Jersey Division of Revenue since they do not create a distinct legal structure, but they are required to register with the New Jersey Division of Taxation. If the founder wishes to conduct business under a name that is different from their first and last name (or any partner’s first and last name), a Registration of Alternate Name (Form C-150G) must be filed with the state Division of Revenue.
Limited Liability Company (LLC)-
Unlike a Sole Proprietorship or Partnership, a Limited Liability Company (LLC) is a separate entity which provides personal liability protection for its owners (shareholders). It requires designating a legal structure with a board of directors, corporate officers, and shareholders. An LLC in New Jersey is a hybrid entity that combines the benefits of a Sole Proprietorship (and a Partnership) and a Corporation. Unlike a Sole Proprietorship and a Partnership, a New Jersey LLC’s assets are separate and distinct from personal assets of its owners; consequently, if the LLC is held liable for debts or wrongdoing in a lawsuit or government action, personal assets are protected. For tax purposes, any profits or losses of the LLC are passed through to its owners for reporting on their personal tax returns. This tax treatment differs from that of the Corporation, where the corporate entity is taxed on its revenue and its shareholders only responsible to report income received from any dividends or other distributions.
Corporations, sometimes referred to as "C" corporations, are the structure chosen by most larger businesses, particularly those looking to raise capital investment beyond the resources of its founders such as through a stock offering. Like the LLC, the Corporation provides protection from personal legal liability of its owners. Unlike the LLC, however, for tax purposes it is taxed at the corporate level and its shareholders are also taxed on the basis of any dividends or other distributions of profits, thus resulting in double taxation. The names of corporations are required to contain the word "corporation," "company," "incorporated," or contain an abbreviation of one of those words.
Corporations may elect different kinds of taxation.
"S corporation"- An "S corporation" under the federal income tax, while often mistakenly viewed as a different type of corporation, is in fact a closely held "C corporation" (or, in some cases, a limited liability company LLC or a partnership) that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. An S corporation that meets specific Internal Revenue Code requirements may pass income (along with other credits, deductions, and losses) directly to shareholders, without having to pay federal corporate taxes. The shareholders must then report the income or loss on their own individual income tax returns.
Smaller firms that might traditionally have been run as partnerships or sole proprietorships are often run as corporations with a small number of shareholders in order to take advantage of the corporate form in its protection from personal liability but with taxation of S corporations resembling that of partnerships with profits and losses passed through to shareholders. While an S corporation's pass-through taxation is similar to an LLC or sole proprietorship, shareholders are not subject to self-employment taxes which can result in substantial tax savings. Unlike a C corporation, an S corporation is not eligible for a dividends received deduction. Also, unlike a C corporation, an S corporation is not subject to the 10 percent of taxable income limitation applicable to charitable contribution deductions.
A corporation is "eligible" to become an S corporation if it: 1) has no more than 100 shareholders; 2) has shareholders who are all individuals (exceptions are made for various tax-exempt organizations, estates, and trusts); 3) has no nonresident as shareholders, and 4) has only one class of stock with its profits and losses allocated to shareholders proportionately to each one's interest in the business.. A limited liability company is eligible to be taxed as an S corporation even if it has first elected to be taxed as a corporation for tax purposes; but subsequently decides to seek approval as an S corporation. The S corporation election must typically be made by the fifteenth day of the third month of the tax year for which the election is intended to be effective, or at any time during the year immediately preceding the tax year. * Business Structures, Internal Revenue Service * S Corporations, Internal Revenue Service * About Form 2553, Election by a Small Business Corporation, Internal Revenue Service
Registering All Businesses for Tax Purposes
All businesses, including proprietorships and partnerships, must register for employer tax purposes. To properly do this in New Jersey, a business owner must file Form NJ-REG. This guarantees that the business is properly registered under the proper tax id number and that it will receive all the necessary notices and returns. Your business registration filings should include the name and address of your business, the directors and owners of the business, any shares issued, and the name and address of a registered agent (who must be a New Jersey resident) to whom the state will send all official correspondence.
Register Your Business Entity with the NJ Division of Revenue You’ll need to file your business’s formation documents with the New Jersey Division of Revenue.
If you’re forming a New Jersey LLC: This can be done online or by mail. The cost to form a New Jersey LLC is $125 (one-time fee).
The form is called a Public Records Filing for New Business Entity. Once it’s approved, it’s then referred to as your Certificate of Formation.
Availability of a name for a new business can be checked by viewing names already in existence at the online database maintained by the NJ Department of the Treasury. Business names also can be reserved before filing for their formation. The amount of time that the name can be reserved depends on business type. Businesses formed outside the state must go by the same name that they are registered under in their home state. If the business name is already in use in New Jersey, the foreign business should establish a DBA or ‘doing business as’ name (see below).
Also known as an alternate name or trade name, a "doing business as" (DBA) name is a registered name for a business. Sole proprietors, partnerships, LLCs, and corporations use DBAs for branding to protect the name of the business from others. The process may be done at the county level through filing with the county clerk or with the New Jersey Department of Treasury depending on the business structure. The use of DBAs for branding only provides protection of the name of the business from others seeking to use the same or closely similar name, and does not provide any protection from personal liability which is established through creation of a LLC or a corporation. Foreign businesses (those formed outside of New Jersey) seeking authorization to do business in this state must determine if the exact name on the formation document in their home state may be used in New Jersey. If a foreign (non-New Jersey) business finds that the corporate name is already taken in New Jersey, it will need to establish a secondary or 'doing business as' name for New Jersey purposes. This 'doing business as' or 'DBA' name must also be available and not taken by another business entity. When submitting the registration document, the business must designate the business name exactly as it was established in the home state of formation followed by the name to be used in New Jersey.
One of the most popular structures to consider is a limited liability company, or LLC. This requires some simple paperwork and registration with the state, and provides the liability protections of a corporation while still giving the tax benefits of a sole proprietorship or partnership, as profits are passed through to the owners who report them on their personal taxes.
A corporation may be another option to consider, completely separating your own liability from that of the company. Incorporating may provide additional benefits and better access to capital. There are different types of corporations with different kinds of taxation to consider.
Businesses have filing obligations for Federal, Municipal & State-level taxes, as well as a requirement to submit an Annual Report. Find information on relevant due dates and reporting responsibilities.
If you have any questions, you can contact the New Jersey Division of Revenue or the Division of Taxation below.
The filing fee for all for-profit businesses — whether domestic or foreign — and for foreign non-profits is $125, while the fee for domestic non-profits is $75.00.
Businesses with employees are required to have a Federal Employer Identification Number or FEIN. This number becomes the tax identification number with New Jersey when filing Form NJ-REG. A FEIN may be applied for online while also filing for the NJ-REG, or may be obtained directly from the IRS website. The NJ-REG must be filed within 60 days of the new business entity filing.
All for-profit and non-profit corporations, LLCs, LLPs and LPs must first obtain an employer identification number (EIN) from the IRS.
Once you obtain an EIN, complete the two filings below:
First, file a Certificate of formation/authorization. The fee is $125 for all for-profit entities and Foreign Non-Profit corporations. The fee is $75 for Domestic Non-Profit corporations. File your certificate online. Second, after filing the certificate of formation/authorization, file the tax/employer registration form (Form NJ-REG). File the NJ-REG online. Once you have successfully completed the two filings above, you will be able to obtain a Business Registration Certificate (BRC) for public contracting and applying for State grants and tax credits.
All general partnerships and any business with employees must first obtain an employer identification number (EIN) from the IRS.
While not required, it is also recommended that all other businesses obtain an EIN as well.
Once you obtain an EIN, file the tax/employer registration form (Form NJ-REG). File the NJ-REG online. Once you have successfully filed the NJ-REG, you will be able to obtain a Business Registration Certificate (BRC) for public contracting and applying for State grants and tax credits.
S-Corps allow shareholders to avoid double taxation (federal tax and individual tax payments) found in other business entities. This is due to their structure as a pass-through entity. Profits and losses are passed through to shareholders who then pay taxes on their personal tax returns.
Another advantage of S-Corps is the liability protection they offer to business owners and shareholders. S-Corp owners receive personal asset protection. This allows business assets to remain separate from personal assets. Finally, S-Corps that don’t have inventory can use the cash method of accounting instead of the accrual method.
If there is at least one employee and wages paid of $1,000 or more in a calendar year, the business is considered as an employer required to register with the Division of Employer Accounts, New Jersey Department of Labor and Workforce Development, for unemployment insurance purposes to insure that employees are protected with unemployment benefits if they are no longer employed and qualify for benefits. The business may also be subject to the provisions of the Federal Unemployment Tax Act (FUTA) if it had covered employment during some portion of a day in 20 different calendar weeks within the calendar year, or had a quarterly payroll of $1,500 or more.. At that point, you must provide quarterly wage reporting via form WR-30, and pay applicable Unemployment (UI), Workforce Development (WF), Temporary Disability (DI) and Family Leave Insurance (FLI) contributions quarterly via form NJ-927.The business also must have worker's compensation insurance to cover employees who may become injured or disabled due to work-related activities. The business founders also should consider whether private insurance should be obtained to offer supplemental disability or health benefits. * Division of Employer Accounts, New Jersey Department of Labor and Workforce Development * Payroll Taxes and Wage Withholding: Filing, Payment, and Reporting Service, New Jersey Division of Taxation
- Business Licenses and Zoning
VIEW THE FEDERAL TAX CALENDAR AT THE IRS Municipal and County Taxes Typically, municipalities do not charge business taxes directly. Revenues for the Municipality come from property taxes, which a business owner may be responsible for paying based on the property you own or lease within the municipality.
There may be fees associated with owning a business within a municipality, including fire protection or Mercantile Licenses. When planning, you should do your due diligence to identify local ordinances that may apply to your business. Contact your Municipal Clerk for additional information.
State of New Jersey Taxes Key dates and deadlines with the State of New Jersey will depend on your business type, how your business is structured, and whether you have any employees.
VIEW THE NJ TAX CALENDAR AT THE DIV. OF TAXATION Annual Report Every business in NJ must file an annual report. This includes simply ensuring that your registered agent and address are up to date, and submitting a $75 filing fee.
The report is due on the last day of the month in the month in which you completed your business formation (LLC, Corporation etc). The responsibility to file falls on the business, even if you fail to receive any notification from the state. Failure to file can result in the revocation of your business.
* The rate is 7.5% for all corporations with entire net income of $100,000 or less. The rate is 6.5% for all corporations with entire net income of $50,000 or less. ... Rates and Accounting Periods. New Jersey Gross ReceiptsMinimum Tax
Costs and Fees for New Jersey IncorporationSome of the fees involved in starting a business.
filing fee to incorporate in the State of New Jersey is $125.
filing fee for the annual report with the Treasury Department, Division of Revenue is $50.
minimum annual tax fee paid to the Department of Revenue is $500.
tax for businesses with income from $100,000 to $250,000 is $750
The Corporation Business Tax rate is 9% on adjusted entire net income or on the portion allocable to New Jersey. The rate is 7.5% for all corporations with entire net income of $100,000 or less. The rate is 6.5% for all corporations with entire net income of $50,000 or less. New Jersey Gross Receipts Minimum Tax Less than $100,000 $500 Equal to or greater than $100,000, but less than $250,000 $750 Equal to or greater than $250,000, but less than $500,000 $1000 Equal to or greater than $500,000, but less than $1,000,000 $1,500 Equal to or greater than $1,000,000 $2,000