New Jersey offers many opportunities to build a successful business. New Jersey has an established and thriving pharmaceutical industry, as well as many flourishing businesses in chemical development, telecommunications, food processing, FinTech, electronics and publishing. In fact, New Jersey remains one of the states with the highest median income in the country—and much of that income is generated through small business ownership. Hoboken, Secaucus, Princeton, and Newark can all boast strong startup communities that have grown exponentially in the past five years.
If you are ready to join one of the hundreds of thousands of successful small business owners in New Jersey, you can find basic information on how to start a business in New Jersey here and then schedule a free consultation with a Priori New Jersey corporate lawyer to discuss next steps.
Recording New Business Entities—Incorporation in New Jersey
Corporate formation is often the first step a potential business owner takes in order to get his or her business up and running. In New Jersey, this is done by recording a new business entity—a legal requirement even for sole proprietors. Incorporation can be a simple as filing a single document or as complex as drafting the operating agreement for your company. It just depends how you plan to operate and how much you need to limit your personal liability.
Filing a Certificate of Business Formation
If your small business will be a separate legal person, that is, a unique legal entity, you must incorporate formally in the state of New Jersey by filing a certificate of business formation. To do this, you simply file a formation or authorization certificate with the Division of Commercial Recording in the New Jersey Department of Treasury. This will include basic ownership information and formation documents. You will also have to pay a $125 fine at the same time.
In New Jersey, only the following business structures are required to operate with a valid certificate of business formation:
- Corporations. Corporations are individual tax entities that limit your personal liability and follow strict regulations in terms of operations and reporting requirements.
- LLCs. Limited Liability Companies have much more flexible corporate structures and are typically taxed as pass-through entities.
- LLPs. Unlike a general partnerships, limited liability partnerships allow partners to limit their personal liability for business debts. In an LLP, a partner is not individually liable for debts and obligations of the partnership arising from errors, omissions, negligence, incompetence, or malfeasance committed by other partners.
Registering a Trade Name
If your small business is a sole proprietorship or a general partnership, your personal liability is not limited, so you do not need to file for a certificate of business formation with the Department of Treasury. You do, however, need to register a trade name in the counties where you will do business with the relevant County Clerk’s Offices. This registration is not optional, and if you want to operate statewide in New Jersey, you must register in each of its 21 counties.
What Does It Mean to Register for Tax and Employer Purposes?
No matter which business structure you ultimately choose, the second step of the incorporation process in New Jersey is always the same: you must “register for tax and employer purposes” with the New Jersey Division of Revenue. To do this, you must fill out Form NJ-REG within 60 days of forming your business. It is illegal to operate as a for-profit company in the state of New Jersey without the Business Registration Certificate you will receive after this form is approved, so make sure to do this right away.
Paying Your Taxes
Any small business is subject to a number of taxes. While the process of getting your Business Registration Certificate will register your company with the state tax department, you must complete some other steps in order to ensure you are fulfilling all your federal, state, and local tax obligations. Federally, you’ll need to register for an Employer Identification Number (EIN) or Federal Tax Identification Number with the IRS. This will not only be used to pay federal social security and corporate income taxes, but also to pay state taxes owed as well.
Not all small businesses are required to pay corporate income or franchise taxes in New Jersey. Only certain corporations will qualify. You can check on the New Jersey Business Portal for information on whether or not your business is likely to qualify or consult a specialized New Jersey tax lawyer. In addition, you may owe unemployment taxes, sales tax, withholding taxes, and others at the state level. All of these must be paid regularly from the first day you earn revenue.
Other Logistics Necessary to Start a Business in New Jersey
Once you are incorporated and registered for taxes, your small business is legal to operate in New Jersey. Of course, there are many smaller logistics that every small business owner must take care of to be in compliance with local, state, and federal regulations.
Permits, Licenses, Certifications, and Registrations
Almost any company must have a number of permits, licenses, certifications, and registrations related to everything from health and safety to the environment to employment issues. In order to determine which may apply to your industry, products and services, and company, you can check with the New Jersey Business Action Center. It also may also help to speak with a New Jersey licensing attorney, as you may also need local or federal permits, licenses, certifications, and registrations.
Every small business with at least one employee needs to be covered by workers’ compensation and unemployment insurance with a private company approved by the New Jersey Department of Labor and Workforce Development. In addition, every company must independently purchase other kinds of insurance, such as disability and health insurance, depending on your company’s size and legal structure.
Insurance requirements of small businesses are not limited to employee coverage. Some cities require commercial liability insurance or real estate rental or owner’s insurance. Even if you are not required to be covered, many small business owners see the value in investing in such insurance regardless. To find out exactly which types of insurance are smart investments for your small business, it may help to consult a New Jersey insurance lawyer.
What other legal issues may face my small business?
There are many. Owning a small business means that you will deal with a number of legal issues on a regular basis that would be impossible to thoroughly detail here. That’s why it can help to consult a New Jersey small business lawyer early in your company’s development. This may help you avoid expensive issues later on.
Is New Jersey a good place to start a business?
With the right business plan, yes. What with famous startup accelerators like Newark Venture Partners in Rutgers and TechLaunch of Kinnelon and even small towns like East Hanover and Eatontown ranked among top cities for small business, it’s easier than ever to get support from thriving startup communities to build your own success. As Katherine O’Neill, executive director of Jumpstart New Jersey Angel Network in Mount Laurel explains, “New Jersey is a leader in encouraging innovation… and in the forefront of supporting early-stage investments in growing companies.”