Although New Jersey is one of the smallest states in the country, it more than makes up for it in population numbers and the scope of its commerce. New Jersey’s small business community is incredibly diverse with close to a million active establishments.
Don’t be intimidated by this density, though. If anything, this could further encourage you to develop your trade in New Jersey in the market segments that are most lucrative. That said, starting a New Jersey LLC could be a lot of work.
This article aims to clarify some of the basics of New Jersey LLC formation, including:
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The first step every entrepreneur should take before doing any formation filings is to name their New Jersey business. This is a vital prep stage for business formation and especially for New Jersey LLCs. After all, your registration application can be easily rejected should you fail to follow naming regulations.
According to the New Jersey Revised Statutes section 42:2C-8, a limited liability company must always indicate its business structure type. This means including its formal designation into the name itself by using any of the following words:
Another major compliance rule is to ensure your LLC name is distinguishable. Under the New Jersey Revised Statutes, an LLC name is sufficiently unique when:
However, according to the 42:2C-8 subsection d., it is possible for a New Jersey LLC to use a noncompliant name if they obtain a court judgment allowing them to do so.
Say you’ve always had a specific name in mind for your business and have grown rather attached to the idea. For instance, you want to name your beauty center “Luxe Parlor, LLC” but a quick check with the New Jersey records shows that the state already has a “Luxe Parlor, Inc” on record, even though the business structures are different.
It’s usually enough to add more words or change their order to make the LLC name compliant. In this case, you can probably alter the name to “Luxe Spa, LLC” or any other available option.
Subsection c. of the 42:2C-8 section also warns that a business name must avoid using prohibited and restricted words, phrases, and abbreviations. Unlike other states, New Jersey does not get any more detailed than that, but this rule generally applies to heavily regulated industries and licensable professions. It’s also likely that your LLC name shouldn’t indicate that you are in any way affiliated with government agencies.
Make sure to research how the New Jersey Division of Revenue’s regulations apply to your industry or profession. If you need one or several licenses for doing business legally, it could also affect LLC New Jersey naming rules.
Given that New Jersey is the most densely populated state in the country, it makes sense that the nine-million population squeezed into such a small area will produce thousands of small businesses. In fact, the current count of small businesses is over 800 thousand, granting New Jersey the 11th place in the US.
All this points to the obvious effects such numbers can have on business name availability so it might take you a lot of effort to sort out your LLC New Jersey naming options. To help you with that, the New Jersey Division of Revenue provides two handy business entity search tools on their website.
The standard business name search allows you to look up other businesses registered in the state. Meanwhile, the business name availability tool is used for direct name searches. Simply search by one or more keywords to see if there are active companies with identical or deceptively similar names.
A good way to overcome the issue of unavailable LLC names is to register an alternate name for your business. Also called a fictitious name or DBA (“doing business as”), it works as a trade name for your LLC so you don’t have to change your legal company name in the formation certificate every time your business direction changes.
The good news is, LLC New Jersey alternate name regulations allow you to have more than one DBA for various transactions. For instance, a DBA is useful when you want to expand your product line but your company name isn’t reflective of the new service.
According to the New Jersey Revised Statutes section 42:2C-9 subsection b., every LLC can file a certificate of registration of the alternate name. The application should state the following:
To obtain the authorization to use the DBA, you have to file form C-150G provided by the New Jersey Division of Revenue. The filing fee is $50 per name. This certificate will be valid for 5 years. To renew it, you should file another application within 90 days of the original certificate’s expiration date.
Perhaps the most important step short of the LLC formation filing itself, the appointment of a registered agent is crucial for the approval of your business registration by the New Jersey Department of Revenue.
The registered agent is an individual or entity responsible for receiving correspondence and official documents on your company’s behalf, and it’s impossible for businesses to operate without one.
In New Jersey registered agents are referred to as agents for service of process due to the nature of their duties.
Service of process refers to court summons served to defendants (in this case, your LLC) by the suing party. Despite the title, agents for service of process receive other legal papers and state correspondence as well.
According to the New Jersey Revised Statutes section 42:C-14 and 42 :2C-17, a registered agent is tasked with the duties of receiving notices, demands, and service of any process on behalf of the New Jersey LLC.
As such, the New Jersey Division of Revenue is unlikely to even consider your application or permit your LLC’s continuous operation if you don’t provide your registered agent information when submitting formation documents.
Under the New Jersey Revised Statutes section 2A:15-30.1 on the administration of civil and criminal justice, every LLC that fails to re-register or maintain a registered agent and fails to respond accordingly will face default judgment, i.e. the court will rule against you simply because you missed the notice and didn’t show up.
This is why most business owners choose to hire professional registered agents, often through LLC formation companies. On the other hand, professional registered agents require recurrent payments, and this is why some small business owners choose to appoint either themselves as their agents or one of their friends and family members.
Doing this job by yourself can definitely be cost-efficient, but not in the long run. Let’s look at both sides of the argument:
As you can see, the disadvantages of doing this job yourself far outweigh whatever financial benefits you initially get. Plus, most LLC registered agent services only charge around $100 per year.
If you wish to hire a professional agent for service of process but don’t know where to start, be sure to check out our Best Registered Agent list.
Additionally, for LLCs that plan to qualify as foreign entities in other states, you will need to appoint a new agent for every new state you choose to expand to. But this is why professional agents are indispensable—they will manage correspondence in other states and notify you whenever needed.
To actually register your New Jersey LLC, every organizer must file the New Jersey certificate of formation known in most states as the articles of organization. Despite such a vaguely intimidating name, the New Jersey certificate has the same function.
Doing every basic filing personally can be rather time-consuming for LLC owners that would like to focus on other aspects of a business launch. If you don’t want to deal with the certificate filing yourself, you can always hire an LLC formation service. You can learn more about your options in our Best LLC formation services article.
For an LLC to be considered an entity authorized to do business in New Jersey, the company’s organizer must sign and deliver the LLC’s certificate of formation to the filing office.
According to the New Jersey Revised Statutes section 42:2C-18, an LLC New Jersey certificate of formation must include:
Aside from that, you are free to include any items you deem pertinent to your LLC’s structure or operation provided it’s in line with legal guidelines. For instance, the LLC’s certificate isn’t allowed to restrict a member or manager’s authority. To do that, you must file a statement of authority as outlined in the New Jersey Revised Statutes section 42:2C-28.
Upon reviewing the filed documents, the New Jersey Department of Revenue will approve the formation of your LLC immediately unless the organizer specified another date in the certificate of formation.
All current fees related to enterprises are listed on the official state website. According to the NJ registry fee schedules, filing the certificate of formation costs $125. The certificate can be filed online on the New Jersey Department of Revenue website.
Typical turnaround times vary based on your location and industry. On average, the state might take between 2 and 4 weeks to process your application.
If you need to get your LLC certificate approved faster, New Jersey offers four levels of expedited processing:
At the time of writing, New Jersey grants expedited services for LLC filings conducted either over-the-counter or by fax.
Operating agreements are contracts between LLC members that outline the basics of the business and every participant’s rights and responsibilities.
Although New Jersey doesn’t make operating agreements a requirement, it’s still a good idea to draft one for your LLC. The state also considers verbal operating agreements valid, but again it’s more reliable for LLCs to have these documents in writing.
If you deem operating agreements unnecessary and then end up encountering legal issues in the future, the state will have the final say on how to handle these things by applying default laws, which are rarely advantageous for LLC owners.
As per New Jersey Revised Statutes section 42:2C-11 subsection a., operating agreements may cover the basics for LLC operation such as:
Other common items for operating agreements include:
Subsection c. also states what LLC operating agreements may not do. Most notably, they can’t:
Drafting any contract may seem like an insurmountable task for owners who are new to this legal process. Even if you have experience with other forms of contracts, it’s best to consult a professional attorney for drafting operating agreements. Alternatively, you can use the cheaper option of using free online templates or get one from your LLC formation service.
When operating agreements are drafted and signed, they don’t need to be filed with the state, in this case, New Jersey Department of Revenue. Unlike your certificate of formation and other business filings, operating agreements are chiefly internal.
For individuals, the IRS uses SSN to keep records of each payer’s income tax information. For LLCs and other business entities, this number is called the Employer Identification Number or EIN.
The EIN is a nine-digit code that you use for your LLC the same way you’d use your social security number. The IRS assigns a unique EIN to a business entity in order to keep track of their commercial activities and update their tax information.
Given that EIN isn’t assigned like SSN is, having one is not mandatory just because you do business. That said, some LLCs are required to get EIN if their activities and business transactions cannot be legally accomplished without EIN.
An LLC may need to obtain an EIN if:
Thankfully, it’s fairly easy to obtain an EIN. The IRS provides EIN-related and tax information on their website where you can submit your EIN application online. Keep in mind that EIN registration is a free service, so it’s best to avoid formation services that charge extremely high fees for EIN filings.
The state of New Jersey is quite demanding when it comes to taxation. After you register your LLC with the New Jersey Department of Revenue and obtain an EIN from the IRS, the next step is to register for tax and obtain a business ID from the state. All your tax information is tied to that state record.
There are also more requirements for companies that sell goods and services in the state. Your main responsibilities as a vendor include:
To pay taxes, you will need to use both your EIN and your New Jersey Business Entity ID number. The state ID is a 10-digit number issued to you when you register your business. The number can be found on your certificate or by looking up your company through the business name search.
Once the formation process is over, it’s time to take care of a few basic maintenance steps. No LLC can really begin operations without completing a few compliance prerequisites.
While some business owners choose to use their personal bank accounts for LLCs, this approach is not really advisable. There are a number of reasons to open a separate business bank account for your company, but it all boils down to the three key concepts:
If you want to run an efficient enterprise, every aspect of its operation must be well-organized, including accounting. It’s easy to fall prey to the initial convenience of using your personal account to run your LLC. But come tax season, tracking each business transaction in your personal books will definitely prove to be an unnecessary chore.
Even if your company is doing well, you will always need additional sources of funding. Most of the time, small businesses rely on SBA loans and bank credit lines. It’s always better to have multiple options available, and having a business bank account grants you that insurance.
Finally, there is the issue of the corporate veil. Initially introduced by corporations, this legal concept applies to LLCs as well and is largely why so many business owners are drawn to this formal structure. The only way to retain the corporate veil is to legally keep your personal and business accounts separate, otherwise, the veil can be pierced. When this happens, your personal assets become vulnerable.
Business insurance is an essential part of sustaining a New Jersey LLC. Even if your primary field of occupation is relatively safe, it’s always better to have a safety net. After all, some things are simply out of your control, and you won’t be able to avoid every situation that puts your business at risk. Moreover, some insurance policies may be mandatory depending on your business activities.
Here are some of the most common types of business insurance policies:
The final stage of setting up your company is ensuring its long-term compliance. For LLCs in New Jersey, compliance regulations often vary based on your jurisdiction. If you fulfill state requirements but don’t do the same for county and city regulations, your business might lose its good standing.
There is no general business license requirement state-wide, but county and city governments impose their own licensing rules. Some professions also need additional licenses and permits.
New Jersey has no state franchise tax, but all multi-member LLCs must file the New Jersey Partnership return using Form NJ-1065. For LLCs with sole owners, the tax duty applies as it would to an individual taxpayer. This means that single-member LLCs provide tax information by filing the individual return using Form NJ-1040 (state residents) or 1040-NR (non-residents).
The federal government classifies the LLC as a structure with a pass-through tax system. This means that business income tax is not reported on behalf of the company itself but goes through the returns of each member according to their share. All profits and losses are reported on Schedule C unless the LLC elects a corporate tax system.
Under the New Jersey Revised Statutes section 42:2C-26, every LLC must submit an annual report with relevant information about the company. This includes:
The fee for filing a New Jersey annual report is $75. If you fail to file your LLC report for 2 consecutive years, the state will classify your business certificate as inactive.
A limited liability company is a welcoming legal structure for many businesses. Start an LLC is easy. Select your state to start.