Choose a name for the business Choose the type of business entity Register the business with the New Jersey Division of Revenue Get a Federal Tax ID number (EIN Number) Open a bank account and get a debit/credit card Get a state business license Register with the New Jersey Division of Taxation
A Sole Proprietorship is the simplest form of doing business and occurs when an individual, either alone or with partners, operates a business without registering or forming a new legal entity. Legally, the individual and the business are treated as one person. The major disadvantage of the sole proprietorship is that the law holds the individual responsible and personally liable for any business activity, debt or wrongdoing. It also may be more difficult for businesses operated as proprietorships to obtain financing or enter agreements with other business entities.
A New Jersey Corporation is a more complex legal structure that requires a board of directors, corporate officers, and shareholders. Corporations don’t work for most small business owners since they face double taxation. Corporations can be beneficial to companies that are looking to raise capital investment, take the company public, or have large healthcare expenses for their employees. The most common types of companies that form Corporations are high-growth technology and startup companies.
Unlike a Sole Proprietorship or Partnership, a Corporation is a separate legal entity. It provides personal liability protection for its owners (shareholders).
An LLC in New Jersey is a hybrid entity that combines the benefits of a Corporation and a Sole Proprietorship (and a Partnership).
A New Jersey LLC is a separate legal entity under the law. And like a Corporation, it provides personal liability protection for the owners. If the LLC is sued, the owner’s personal assets – like their home, cars, and bank accounts – are protected. And like a Sole Proprietorship, an LLC also has pass-through taxation (so no double taxation).
An LLC is the most popular option and a good choice for people who want to run a business for two reasons:
Personal liability protection (personal assets are kept safe) No double taxation Unlike a Sole Proprietorship (and a Partnership), your New Jersey LLC’s assets are separate and distinct from your personal assets. In the event your LLC gets sued, your personal assets are protected.
And unlike a Corporation, your LLC is not subject to double taxation. Instead, your LLC’s profits will “flow through” to your personal tax return.
For more details, we have a video on LLC vs Sole Proprietorship vs Corporation.
If you want to form an LLC in New Jersey, we have instructions here: New Jersey LLC formation.
If you want to form a Corporation in New Jersey, you can file it yourself or you can hire a filing company like Northwest Registered Agent.
Step 3: 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, but we recommend forming your LLC online. 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.
Determine Your Business Structure The type of legal entity is an important choice whether you start an online business or a brick-and-mortar company.
A sole proprietorship is simple to set up and puts you squarely in control. You'll need to register the name you are doing business under with your state or county. While you are completely in control in a sole proprietorship, you also are completely at risk. If the company gets sued, you are personally and financially liable. If the company goes under, you're on the hook for the debts.
A partnership functions in much the same way, except you and someone else are owners together and equally liable.
One of the most popular structures to consider as you determine how to start your own business is a limited liability company, or LLC. This requires some simple paperwork and registration with your state, and provides you with the liability protections of a corporation—the LLC is liable, not you—while still giving you 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.
Forming an LLC helps protect your personal assets. It also unlocks the ability for you to open bank accounts, enter into contracts, hire employees, and get business licenses and permits. What's the difference between an LLC and a corporation? Both protect owners so they're not personally on the hook for business liabilities or debts. But, key differences include how they're owned (LLCs have one or more individual members, and corporations have shareholders) and maintained (corporations generally have more formal record-keeping and reporting requirements). You choose. Single-member LLCs can file as a sole proprietor. Multi-member LLCs can file as a partnership. Any LLC can file as a C or S corporation.
You will need to create a business plan so that you can work through important questions and become fully prepared for what is ahead. The business plan is helps focus the goals of the business, provides a benchmark to measure progress, and also serves as a document available to potential investors or lenders to help evaluate the business.
You will need to decide whether your business will be brick and mortar, or an online business, or both. You also will need to include the type of business structure you are going to create—such as a sole proprietorship, LLC, or corporation.
Perhaps the most important component of the business plan is the budget and financials. This should outline projected expenses and profits, including the costs of employees, inventory, and equipment and where the money to start twill come from and whether it will be necessary to seek additional funding. The business plan is meant to help you think through and plan your company, it is also a document you can provide to potential investors or lenders to help them evaluate your business.
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’re operating as a Sole Proprietorship or Partnership in New Jersey: You don’t have to register with the New Jersey Division of Revenue since you’re not creating a distinct legal structure. However, you will need to register with the New Jersey Division of Taxation.
If you want to do business under a name that is different than your first and last name (or you and your partner’s first and last name), you will need to file an Alternate Name (aka Fictitious Name).
The form is called the Registration of Alternate Name (Form C-150G). The filing fee is $50.
Note: If you’re going to form an LLC in New Jersey and operate under the LLC’s legal name, you don’t have to file an Alternate Name.
If you have any questions, you can contact the New Jersey Division of Revenue or the Division of Taxation below.
NJ Division of Revenue Phone: 609-292-9292 Email: https://www.state.nj.us/treasury/revenue/revgencode.shtml Website: https://www.state.nj.us/treasury/revenue/
NJ Division of Taxation Phone: 609-292-6400 Email: https://www.state.nj.us/treasury/taxation/email.shtml Website: https://www.nj.gov/treasury/taxation/
All individuals or companies doing business in New Jersey must be registered. This includes businesses:
Withholding payroll taxes for an employee; Planning to contract with any public agency in New Jersey, including State agencies, local governments, colleges/universities and local school boards; Seeking casino licenses; and Applying for a State grant or tax credit.
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, we recommend 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.
Federal Taxes Key dates and deadlines with the US Internal Revenue Service (IRS) will depend on your business type, how your business is structured, and whether you have any employees.
For more information about your Federal tax responsibilities, find information about business taxes by the IRS.
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.