How to Start an LLC in New Jersey
If you’re ready to launch a new business in the Garden State, this step-by-step guide will help you understand how an LLC works, the personal liability protection behind this type of business, and how entrepreneurs can register their startups with the state.
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To get your LLC going, you need to pick a name. There may be lots of names bouncing around in your head, but the state has some rules about what you can use. Its primary rule is that a business name can’t be the same (or too similar) as another business already established in the state.
It’s important to have a name picked for your business before you proceed with registration and other legal aspects. It’s also crucial to be sure your name isn’t being used elsewhere. The state will deny your registration application if your name isn’t distinct or is too similar to another business name and you will bear the expense of correcting the problem.
Name your LLC
Have a business name in mind? Check to see if it’s listed in the state’s business directory. Names that don’t come up in a search are free to claim.
The State of New Jersey has a free business entity name search tool to help you see if your name is available in the state.
Most states have it on their Secretary of State’s website but New Jersey has it on its Division of Revenue and Enterprise Services (DORES) website. Regardless, you’ll use this state website to research name availability.
Remember, the name can’t be similar either. You can’t add abbreviations, spacing, or punctuation to make a name different.
Google your proposed business name too to see if it’s already in use online. Ideally, you’ll buy a matching domain name, so it’s good to know if that name is already taken by another company.
See if your desired social media handles are available too. There could be other small businesses or sole proprietorships that have a business with the same name and are using the social handles that you want.
You need to know if these names are already in use because they will impact your company’s marketing. It’s best to have the domain name and social media handles match your LLC name.
Want to reserve a name? File a name reservation form to hold your name before filing formation documents.
Select a registered agent
A registered agent is required under New Jersey law for every limited liability company (LLC), limited partnership, or corporation. Additionally, the state requires a registered agent for a limited liability partnership (LLP) if the business doesn’t have an office in New Jersey.
A registered agent fulfills a legal requirement that someone be available to accept documents and letters on behalf of the company. It is primarily to ensure that there is someone representing the company who can accept service of process documents, which are filed during a lawsuit.
Being a registered agent in New Jersey doesn’t require any special skills, but it does require daytime availability. You can be your own registered agent or choose a friend, family member, or another LLC member to fulfill the role.
New Jersey has basic rules about who can be a registered agent. They include:
- The person must be a legal adult of 18 years old or more
- An individual serving as a registered agent must live in New Jersey and have a physical New Jersey address (not a P.O. box)
- A corporation serving as a registered agent must be legally able to do business in New Jersey.
Some business owners find it helpful and convenient to hire a corporation to serve as their registered agent. There are both national brands and local entities that provide registered agent services with many offering other types of business services to entrepreneurs.
Picking a professional service to accept legal documents for your business can give you peace of mind and is especially helpful for LLC owners that travel a lot.
Get your EIN and register for taxes
Unlike other states, New Jersey requires all businesses to obtain an employer identification number (EIN) from the Internal Revenue Service before they apply for a Certificate of Formation.
The IRS assigns an EIN to businesses so it can be used to file and pay taxes as well as to open bank accounts, get loans, and numerous other purposes. You will use your EIN repeatedly throughout the life of your business. Think of it like a social security number, but for your business.
You can get an EIN by applying online with the IRS. The IRS doesn’t require every business to have an EIN, but the state of New Jersey does.
New Jersey also requires you to register for state taxation after you apply for a Certificate of Formation, but before you are approved. You won’t be able to get a Business Registration Certificate (BRC) until you complete those steps.
You can get your EIN by visiting the IRS website.
File Certificate of Formation
The next form to file is a Certificate of Formation with the State of New Jersey. The State Department of the Treasury has a streamlined online process to make it easy to handle this. However, it is a little limited in who can use online registration.
In other states, entrepreneurs file Articles of Organization. The name is different, but the information provided is the same.
The Certificate of Formation is both an application to officially set up a business in the state, and once approved, serves as proof of registration.
The form is fairly simple to fill out. Business owners are asked to provide the following information:
- A business name
- The type of business
- A registered agent’s name and mailing address
- A good standing certificate from the state where your business is based if not in New Jersey
- A credit card or echeck to pay
You can find out more about filing formation documents here.
The filing fee for submitting a Certificate of Formation is $125 in New Jersey for all for-profit businesses and non-profit corporations located outside the state.
New Jersey processing time
It takes around four weeks for the State of New Jersey to approve your Certificate of Formation. It doesn’t matter what your LLC management structure is, be it single-member LLCs, manager-managed, or member-managed, the processing time is still the same.
You can rush the process by ordering an expedited service. An additional $25 will have the state review your document in 8.5 hours.
Create an LLC operating agreement
New Jersey, like most states, does not legislate that businesses have an operating agreement to do business. However, it’s still a good idea for a few reasons especially if you are starting an LLC.
An operating agreement helps LLC members run the business without needing to accommodate all state laws. There are many state laws regarding business operations, but an operating agreement takes priority over many of those associated with daily operations.
However, those who don’t have an operating agreement are placed under state laws by default. That can be burdensome.
An operating agreement is a good way for all LLC members to agree on how the business will be run and to set a plan in motion for unexpected events like the departure or death of a member. It sets standards in place for things like transferring interest and compensation.
An operating agreement should be detailed and include:
- Activities of the LLC
- Defining who makes decisions
- Voter rights
- Procedures for member interest transfers
- Initial contributions
- Management of profits and losses
- Management methods, structure
- Compensation to LLC members
- Bookkeeping methods
- Dissolution procedures
Setting up a business is the first step. Now you need to run it. Before you start selling products or seeing clients, there are a few other things that should be on your to-do list.
Open business bank accounts
One of the most important things you will do in forming your LLC in New Jersey is open bank accounts under the business name. Opening a bank account has several benefits. It keeps all money from the business trackable and separate from personal accounts and it allows you to accept checks written to the LLC.
Having a business bank account also gives you options for other business products like debit and credit cards. It helps your LLC build a financial relationship with a bank or credit union too, which will prove valuable as your business moves on.
Banks are different from credit unions so you should check out the advantages of each. Some financial institutions have good reputations with New Jersey businesses and are listed with the Small Business Administration (SBA). TD Bank offers the best flexibility while PNC Bank has the most ATM access. Affinity Credit Union is noted to be the best credit union for small businesses in New Jersey.
Review LLC tax rules in New Jersey
New Jersey does charge a franchise tax, which the state calls a corporate tax. Tax rates vary based on a company’s net income. It counts net revenue rather than gross receipts. The rate is 7.5% for businesses with less than $100,000 in net revenue. It drops to 6.5% for businesses with less than $50,000 in net revenue.
Those who make more will pay more tax. For instance, those businesses with a net revenue between $100,00 and $250,000 will have a $750 minimum tax.
File an annual report
New Jersey requires all businesses to file an annual report to ensure their information is up-to-date. It gives the business a chance to change it if things like its registered agent or business address change.
The annual report is due on the last day of the month when you completed your business formation. For instance, if you completed your business formation in May, your annual report is due May 31. The cost is $75 and you can file online.
In other states, the annual report is called a Statement of Information.
You can file a New Jersey annual report with the New Jersey DORES office.
Get insurance for your LLC
It’s important to protect yourself and your business with insurance, but New Jersey doesn’t require insurance for every situation.
New Jersey only requires that all businesses with employees have worker’s compensation insurance. Worker’s compensation pays for injuries occurring on the job. While some states have options for businesses with only one or two employees, family members working for the company, or part-time workers, New Jersey requires any business with any type of employee to have worker’s compensation.
Businesses are not required to provide health or life insurance to employees in New Jersey.
Another type of insurance every business should include is liability insurance. While an LLC does protect your personal assets by keeping them separate from any business assets, liability insurance is still a good choice.
Liability insurance protects you if someone sues you over a product or service, particularly if a customer is injured or their property is damaged in the course of doing business. While it isn’t mandated in New Jersey, many B2B customers and other vendors require it before they will do business with you.
Other types of insurance you should obtain for your LLC are property and equipment insurance policies. That helps if your business ever sustains damage from a storm, fire, or experiences a theft.
Additional resources to help you set up a business in New Jersey
New Jersey has several agencies and resources to ensure your LLC is set up properly. Forming an LLC can be challenging, but these resources can help:
How are LLCs taxed in New Jersey?
LLC owners pay federal taxes and state taxes on their own personal tax returns. LLCs have what’s called pass-through taxation, so income tax is charged on any profit from the business.
What are the best opportunities for starting a business in New Jersey?
Three prominent industries in the New Jersey area are transportation, logistics sectors as well as manufacturing so there is room for growth there. There are always opportunities in B2B businesses and current New Jersey businesses always need support companies for a variety of items from cleaning products to inventory.
What area of business is growing the most in New Jersey?
The number one trending area for business growth in the Garden State is currently in pharmaceutical and life sciences. Employment has dramatically increased in those sectors.
What’s the largest manufacturer in New Jersey?
The largest manufacturer in New Jersey is Novartis Pharmaceutical Corp which has $52 billion in revenue and employs 5,000 people.
Is an LLC the best type of business structure in New Jersey?
You can choose any business structure you want. LLC formation gives you easy means to set up a business and is fairly simple to manage for tax purposes.
Does the state charge an LLC tax?
The state does charge LLCs a specific tax. It’s called a corporate tax. The amount of tax you pay depends on how much money the company brings in.
Do you need to obtain business licenses in New Jersey?
Many businesses do need to obtain business licenses. The state has an entire handbook on which industries need a license and how to apply for each.
Are Articles of Organization the same as Certificate of Formation?
Yes. Both Articles of Organization and Certificate of Formation are formation documents. Some states call the documents by different names, but their purpose is the same. The documents always ask for basic business information and contact details.
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