Are you about starting a business in New Jersey and want to form an LLC? If YES, here are the requirement to start an LLC in New Jersey and how much it cost. An LLC in New Jersey offers entrepreneurs a form of corporate organization that makes business processes and formation easy and flexible. An LLC, like the alternative corporate forms of organization, is generally a prime choice when starting a business in New Jersey.
Why Form an LLC in New Jersey?
A New Jersey LLC satisfies the necessary condition of your business planning development in that it meets the requirement for you to establish a legal form of organization in order to gain the statutory benefits and protection available in New Jersey for your business.
Note that your New Jersey LLC establishes a legal presence within the state, which you can leverage as a platform for in-state operations. The benefit of a New Jersey LLC is that you can gain the protection of the law when separating your personal assets from the future liabilities of your business.
Your New Jersey LLC qualifies as a “pass through” vehicle, which means that it is not taxed at either the state of federal level, as long as your New Jersey LLC remains in good corporate standing. Meanwhile, failure to maintain good standing in terms of corporate formalities and related filings could mean that your New Jersey LLC could be re-classified as a corporation by the Federal Government, thus establishing an immediate corporate tax liability and possible fines and penalties.
Simplicity and flexibility are characteristics of a New Jersey LLC. Unlike the C Corporation or the Subchapter S Corporation which always need annual meetings and written minutes along with other corporate procedures, your New Jersey LLC does not require such meetings and records.
Just like the C corporation, your LLC can bring in unlimited number of investors or members through private placement contracting, which gives you the opportunity to capitalize your business at whatever level that meets your needs, inclusive of debt financing as arranged with lenders.
But, unlike the C corporation which must distribute earnings on a dollar-per-share basis, your LLC can develop much more flexible distribution policies, as will be noted in your LLC operating agreement.
Note that in New Jersey and other states, you’re expected to prepare a written abstract detailing your LLC purpose, the names of your initial members, the name and address of your New Jersey registered agent, the details of which will be introduced into the body of your LLC operating agreement and related formation documents assembled for application to the state of New Jersey.
If you’re interested in forming an LLC in New Jersey or looking to gather enough information to aid your decision, below is a thorough guide on the key processes of forming an LLC in New Jersey.
A Detailed Guide to Starting a LLC in New Jersey and Its Cost
- Name Your New Jersey LLC
Before forming your New Jersey LLC with the Division of Revenue, you must search the state’s database to make sure your desired LLC name is available for use. Under New Jersey law, an LLC name must contain the words “Limited Liability Company” or the abbreviation “L.L.C.”
Your LLC’s name must be distinguishable from the names of other business entities already on file with the New Jersey Division of Revenue & Enterprise Services. Names may be checked for availability by at the New Jersey Business Record Service business name database.
You may reserve a name for 120 days by filing an Application for Reservation of Name (UNRR-1) with the New Jersey Division of Revenue & Enterprise Services. The application may be filed online at the Division of Revenue and Enterprise Services Central Forms Repository or by postal mail. The filing fee is $50.
- Your name cannot include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
- Restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual, such as a doctor or lawyer, to be part of your LLC.
- Finish the Public Records Filing
The next step to take is to file for a New Business Entity with the New Jersey Department of Treasury, Division of Revenue & Enterprise Services. This filing must include: the LLC’s name and address; the name and address of the LLC’s registered agent; the LLC’s purpose; its dissolution date, if any; and the name and address of members or managers.
The Division of Revenue has a pre-printed form on its website that you can complete and submit by postal mail or fax. Alternatively, you may complete a paperless filing online through the Division of Revenue Business Formation web portal. The filing fee is $125. You must pay an additional $3.50 if you file online and pay by credit card.
- Appoint a Registered Agent
You are mandated to nominate a Registered Agent for your LLC. A registered agent is an individual or business entity responsible for receiving important legal documents on behalf of your business. Think of your registered agent as your business’ point of contact with the state. A registered agent must be a resident of New Jersey or a corporation authorized to transact business in New Jersey.
You may elect an individual within your company as registered agent. Your New Jersey Registered Agent should have a physical address within the state (PO Boxes are not allowed) where Service of Process and other documents can be received.
- Prepare an Operating Agreement
An LLC operating agreement is not required in New Jersey, but is highly advisable. An operating agreement is a legal document outlining the ownership and operating procedures of an LLC. A comprehensive operating agreement ensures that all business owners are on the same page and reduces the risk of future conflict. An Operating Agreement should be put in place for both Single-Member LLCs and Multi-Member LLCs located in New Jersey.
The LLC’s Operating Agreement will also include information about how profits are split, how taxes are paid, and how the New Jersey LLC is managed. Having an Operating Agreement for your New Jersey LLC also helps prove that the company is a separate legal entity from yourself. This helps maintain the personal asset protection provided by your LLC.
- File The New Jersey Certificate Of Formation
To register your LLC, you will need to file the Certificate of Formation with the State of New Jersey. This can be done online, by mail, or in-person. In New Jersey, the words “formation” and “registration” mean two completely different things.
You first must form your New Jersey LLC by filing a Public Records Filing for the New Business Entity. Once this is approved, it’s referred to as your Certificate of Formation. This is filed with the NJ Division of Revenue & Enterprise Services.
It is also mandatory for all New Jersey LLCs to register with the Division of Taxation within 60 days. Both the LLC Public Records filing and the registration (called a Business Registration Application or NJ-REG) can be done online. Now is a good time to consider whether your LLC will be member-managed or manager-managed.
- Comply With Other Tax and Regulatory Requirements
All LLCs in New Jersey are required to register with the New Jersey Division of Revenue and Enterprise Services for business entity and tax filings within 60 days of LLC formation. This will ensure your business receives a New Jersey tax identification number, allowing you to receive all proper returns and notices.
You can do this either online, or by mail. A New Jersey LLC is a pass-through entity which means the profits and losses “flow through” the LLC and its the owners who are responsible for reporting them on their personal income tax return.
By default, a Single-Member LLC is treated as a Disregarded Entity. This means the IRS “ignores” the LLC and looks at who the owners are. If your LLC is owned by an individual, the IRS will tax your LLC like a Sole Proprietorship. If your LLC is owned by another company, the IRS will tax your LLC as a branch/division of the parent company.
Your LLC is still a separate legal entity from yourself and your personal assets are still protected in the event of a lawsuit. Besides the default tax classifications, a New Jersey LLC can also elect to be taxed like a Corporation. There are two types of corporate taxation: C-Corp and S-Corp. The New Jersey Division of Revenue will honour your federal election if your LLC is taxed as a C-Corp.
However, if you make the federal election to have your LLC taxed as an S-Corp, New Jersey doesn’t honour this and you must also file CBT-2553 with the state. It’s also important to note that LLC/C-Corps have a minimum corporate tax of $500 per year and LLC/S-Corps have a minimum corporate tax of $375 per year.
If your New Jersey LLC has 2 or more Members (a Multi-Member LLC), along with your state Partnership Return (NJ-1065), you must also pay $150 per LLC Member. This is called the “LLC Partner Tax”. The LLC Partner tax is not required for LLCs with 1 Member (Single-Member LLCs). Your New Jersey LLC may also be responsible for additional tax filing and reporting.
It varies widely and depends on your industry and how you make money. Some examples of additional taxes are payroll tax, federal unemployment tax, state unemployment tax, workers’ compensation tax/insurance, capital gains tax, state franchise tax, gross receipts tax, dividend tax, sales tax, use tax, excise tax, and more.
- Get An EIN
The Employer Identification Number (EIN), or Federal Tax Identification Number, is used to identify a business entity. It is essentially a social security number for the company. An EIN (Employer Identification Number) is obtained from the IRS after your New Jersey LLC is approved by the state.
Note that you need to get your EIN in order to complete the LLC “registration”. An EIN is also called an EIN Number, FEIN, Federal Employer Identification Number, or a Federal Tax ID Number.
This number helps identify your LLC to the IRS for tax and filing purposes. Your New Jersey LLC’s EIN will also be used when you open an LLC bank account, register your LLC with the Division of Taxation, file taxes, apply for a business license (if applicable), and to process employee payroll (if applicable).
Don’t apply for an EIN until your New Jersey LLC is approved by the Division of Revenue. Meaning, make sure the “formation” step is complete and your LLC is approved.
The IRS issues EINs to LLCs at no cost. Note that you will need an IRS’s “contact person” when you apply for your EIN. If you have a Single-Member LLC, you will be the Responsible Party. If you have a Multi-Member LLC, any LLC Member can be the Responsible Party.
- File Annual Reports
All New Jersey LLCs and foreign LLCs authorized to do business in the state must file an annual report. The report must be filed each year on the anniversary month of the LLC’s formation or authorization to do business in New Jersey. The report must be filed online through the New Jersey Division of Revenue On-line Corporate Annual Report webpage. The filing fee is $50.
Annual Reports for New Jersey LLCs are due the year after the LLC was formed. And they are due by the last day of the LLC’s anniversary month. For example, if your LLC was formed on April 12th 2021, your first Annual Report will be due by April 30th 2021.
Then it’s due by April 30th every year going forward. You can only file your New Jersey LLC’s Annual Report online: https://www.njportal.com/dor/annualreports. After you file your New Jersey LLC’s Annual Report online, you’ll be able to download a filed copy from the Confirmation Page.
There is no state-level business license that you need to get in New Jersey. Instead, licenses and permit requirements are set at the municipal level. For example, depending on where your New Jersey LLC is located and what industry you’re in, your county, city, or town may require a certain business license (and/or permit) to operate. Once the IRS has issued an EIN Number to your New Jersey LLC, you can then open a business checking account.
It’s best practice to have a business checking account for your New Jersey LLC in order to maintain your personal liability protection. Using a personal bank account for your LLC is called “commingling of assets” and this can lead to personal liability issues if you end up in court. Having a separate business bank account for your LLC also makes record-keeping easier for accounting and tax purposes.
Don’t forget to get adequate insurance for your business as it will help you manage risks and focus on growing your business. Also note that improperly signing a document as yourself and not as a representative of the business can leave you open to personal liability. So be mindful and careful when signing any business document.