How to Open an LLC in New Jersey in 2022

Are you thinking how to set up an LLC in NJ? If yes, you are not alone in this. Many business persons have moved to this Northeast state in the hope of making a kill. With the state’s extensive transportation network coupled with a skilled workforce and immense growth opportunities, this move is not a surprise. Today, we have a glance at what makes this state such an ideal business location and what you need to start an LLC in New Jersey.

Business Environment

NJ is not your average state when it comes to business opportunities. Below are some reasons why it has surpassed many other states in its offerings to entrepreneurs:

• A workforce can make or break your business. Before moving location, you must always think about the kind of labor that you will find in the new place. How skilled are the people there? What are their education levels? Figure out which type of labor you need and if you can get it there. The good news with NJ is that the residents are not only highly educated but also highly skilled. Thus, whether you are looking for people to work in an office or industrial setting, you will find the right people.
• You will also appreciate the level of innovation in the state. It all boils down to the amazing educational institutions which continue to mold learners into thinkers. Problem solving has become an essential skill in the modern world. And with NJ residents behind your operations, you can rest assured that proactive thinking will take the day.
• If you look at NJ, you can see that it has quite a strategic position regarding access to other states. You have the whole Northeast corridor availed to you, allowing you access to tens of millions of potential clients. Additionally, thanks to the port, you can also move your products across the country and around the globe with ease. Plus, you can also take advantage of the airports which offer both domestic and international flights.
• Additionally, the environment fosters a balance between work and play, while offering affordable office and home locations. Besides, you also get a ton of support from training programs and investors. And if your capital outlay is small, you can work in a collaborative workspace as you forge ahead, sometimes even for free.

With all these possible opportunities, you can see why it would be a good idea to start a business in NJ. Filing fees will cost you only $125 and starting your operations is as simple as following the steps below:

Opening an LLC in NJ

Let us cover all the steps you need to cover to get started on this journey. Please note that they all hold significant relevance to how compliant you will be regarding the law. Here goes:

Step 1: Select a type of entity and name your business

NJ has fast become a great place to start a business, more so with its increasingly improving economy. A major decision that you have to make at the onset of your operations is the business structure under which you will operate. To make this choice, you should consider the following implications:

• How much liability are you willing to take on when operating the business? You need to think about how much protection you would like to enjoy in case anything goes wrong.
• Is it possible for you to pass the business losses to your individual tax returns? Will you get double taxed should you choose to follow a given structure? While this may not look like a big deal at this moment, such aspects have a huge impact on your profitability.
• Who will have control over the business? Would you rather go at it alone or would you prefer to have someone else helping you?

Aside from considering the above, you should also seek legal counsel as well as engage the services of an accountant. This way, you can cover all ground before making a decision that can otherwise go wrong. Here are the entities you can open in NJ:

• Sole Proprietorship
• General Partnership
• Corporation
• Limited Liability Company

Benefits of going the LLC way

You may have noticed that many people opt to open LLCs compared to the other entities. Other than tax benefits, this entity also allows you to have as many members as you would like. Additionally, they can all participate in managing the business operations without having to be in the board. The capital structure is also flexible, as are many aspects of this entity, giving you more control by reducing the necessary formalities.

Want to learn more? Read our full Choose a business type in New Jersey

Naming

Naming is not as simple as settling on a name you like and going with it. You are subject to the following guidelines:

• The name should not share similarities with other entities and should be easy to distinguish from others. Make sure that it is available for use and is not owned by other entities or under a trademark. While on this, you can also check if the URL under the name is available.
• A ‘limited liability company’ designator should be at the end of the name. You are free to use an abbreviation of the same such as LLC. However, you cannot use designators suited for other entities as this can cause confusion.
• Also on confusion, the name should not allude to a relationship between your company and a government agency.
• Where you must use words such as attorney or bank, or others which signify specialized professional services, you should file paperwork on the same. It is also required that you engage a professional to be part of the business operations.

Name Search

You should check with the entity name search option on the NJ website to see if the preferred name is available. If it is and meets the above guidelines, you can reserve it with the state of department for 120 days for domestic businesses. If yours is a foreign business, the reservation will last till the end of the calendar year. Please note that reservation costs $50, and you can do this by mail or online. If you want the reservation done fast, you can add a sum of $25 to the filing fees to hasten the process.

Want to learn more? Read our full Unique Business Name For LLC

Step 2:  Assign a Registered Agent to Open an LLC in NJ

When running your business, there will be a need to communicate often with the authorities. This communication will extend to filing reminders and could even include legal summons. It can be hectic to keep abreast of all the things you should do to keep the business running. As such, it is always best that you designate an agent to handle all this on your behalf. Note that this is not only a matter of preference but a requirement under the law.

An agent can either be an individual or a business who accepts tax and legal documents as well as service of process on your behalf. What does this mean? If you ever got sued, law enforcement officers would not come knocking on your door. Instead, they would seek out the agent and serve them with the necessary paperwork.

Who can represent you?

At this point, you may be wondering who can take on this crucial role. Well, almost anyone can be your primary point of contact with the state. Even you can take on this responsibility or you can delegate it to a friend or member of the business. However, please note that the elected individual must meet the following criteria:

• The individual should be aged at least 18 years and should be capable of entering into a contractual agreement (i.e. of sound mind)
• The person should have a physical address where you conduct your business. That means that as you set up shop in New Jersey, the agent should have an address in this state. Please note that this does not refer to a mail box, but rather, an actual address where law enforcement officers can reach the designated person
• Having a physical address is not enough. Keep in mind that this individual is in place to enable the authorities to contact you when need arises. As such, the person should be available for contact during normal working hours.

How about third parties?

Given the hassle of receiving summons and other important documents, you may find that serving as an agent may be too much work for you. Also, you might find that other people who may want to take on the role (such as friends) may not have what it takes to be effective. In this case, you would be better off finding a registered agent (a business) operating in the state.

Registered agents take care of all the receipt of documents and remind you of any filings due to keep you compliant. You should expect to pay a sum of money to get such services. However, once you compare the benefits of this convenience to the capital outlay, the investment starts to make sense.

Here are some considerations when deciding on whether you should use a third party:

• Suppose you run your business out of your home (as many people have taken to with the advancements in technology). In this case, you would likely want to enjoy privacy as to your address. You do not want to have people showing up at your door now and then for business arrangements. Having a third party would enable you to avoid such occurrences as they would use their address.
• If someone else is available all day to handle receipts, there is no need for you to stick around when you do not have to. You can leave work at any time to check on work things or even take a break when the workload proves to be too much. Little will tie you to the office or workspace.
• If you are new to running a business, you are likely to run into issues of compliance in the first few years as you get the hang of things. With a professional handling your legal documents, you can rest assured that you will get fair warning before deadlines are due. This assurance enables you to focus on the business operations as you stabilize the venture to break even.

Options

• ZenBusiness – not only does this service accept legal documents but it also enables you to stay compliant with state laws, allowing you to stay on track. Charges start at $99 a year.
• Harbor Compliance – this company has worked with thousands of businesses and thus has the knowhow when dealing with legal documents. Additionally, it offers compliance guides for use now and in the future. Charges start at $99 a year.
• IncFile – at a fee of $119 a year, you can rely on this service to keep you up to date with your legal obligations. Additionally, if they file your registration documents on your behalf, you qualify for free services for one year.
• Northwest Registered Agent – for a business that has been in operation since 1998, you can expect a lot from this reputable company. It scans all documents such that you do not miss out on important filings. Charges start at $125 a year.
• LegalZoom – compared to other options, this company charges fees that are on the higher side, starting at $159 a year. However, their packages come with the added bonus of free legal advice. How great is that?

Election

To formally designate an individual or business as your primary point of contact, you need to elect them into the position by filling a form.

Want to learn more? Read our full Assign a Registered Agent

Step 3: File the Certificate of Formation

The law requires that you register your business for you to lawfully operate in the state. Luckily, this is as simple as filing a certificate of formation, in which you should include the following details:

• The proposed name of the company, as chosen under step 1. Please work with the guidelines covered above to ensure the name is acceptable.

• The kind of entity you will run
• Your primary point of contact and their address. We mentioned in step 2 that you would need to elect someone to take on this role and this is where you do it.
• How long you plan to be in business- if you plan on running it in perpetuity, you can leave this section blank
• What kind of operations you will undertake. It is a requirement that the aim of the business be lawful.

Application

The application process can take place online or offline as follows:

Online

You do not have to show up in person or send any hard copies and can complete your registration under this (link). Under this, you should choose the domestic LLC option before following and filling the prompts that follow.

Mail

The form should be available online on this link, which you should download and fill manually, before addressing it to:

New Jersey Division of Revenue
PO Box 252
Trenton, NJ 08646

In Person

Once again, locate the forms online and download them before filling them and delivering them to:

New Jersey Division of Revenue
33 West State Street
Trenton, NJ 08608

FAX

You also have the option to send your registration forms using this mode to this address: (609) 292-4291. When sending, make sure that you include a cover sheet, showing the recipient as well as: name, date, bank account/ credit card number, description of service requested, LLC name, no. of pages,  and a return number.

Want to learn more? Read our full File LLC Certificate of Formation

Step 4: Get an EIN

The next step lies in getting an employer identification number which enables the IRS to keep tabs on your tax reports, thus enabling you to abide by the laws. Please note that you should not apply for this ID until you have the right to undertake your business operations. Else, you will have a hard time providing some of the details which will be necessary during the submissions.

Do you have to make an application? You may have come across some people who have done well without having such an ID and may think that you may also not need one. While it is true that you may not need it, you will find it helpful to have it as time goes by. Below are some of the circumstances that prompt an application:

• Are you going to hire people? If you will recruit the help of employees to run your operations, you will need to get the ID to help with employment tax reports.
• How many people will run the operations? If you will run the company alone, you can do without the ID. However, where you have other people helping you, the law requires that you make an application.

Other than complying with the law, is there any other good that comes from having this ID? Yes, here are some reasons why you may want to have one even if you don’t fall into the above criteria:

• For opening a business bank account, you are likely to need this ID for credibility. Keep in mind that having such an account makes it easier for you to acquire loans for future business growth.
• Suppose you want to hire help, you will need to set up a payroll, and for this, the ID will be necessary
• Also, having this identification enables you to keep your personal ID private, which protects a level of protection from identity theft

You do not have to pay to get this ID and can make an application in the following ways:

Online

The portal is open from 7am to 10 pm EST where you will find an online form which you should fill out the required fields. You can find the link here.

Mail

The other option is to download and fill this form and send it to the following address:

Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999

FAX

As is the case with the mail, you need to download and fill this form and send it to (855) 641-6935

Want to learn more? Read our full Get an Employer Identification Number For LLC

Step 5: Formulate an Operating Agreement

You can think of an operating agreement as a constitution for your business operations. It guides you on what you should do and informs other members of their duties in the company. With this, you can avoid stalemates during internal disagreements, enabling you to focus on your objectives as a company.

Please note that this is not something you have to do to operate your business and you can make do without it. However, in the event that you face legal trouble among yourselves, this agreement would be the first reference point. Where you do not have any laws, the state would apply default laws. These are principles that apply to businesses that operate devoid of agreements and they tend to be broad and not tailored to your company. Thus, the possibility of losing out on your rights is high when going the default way. It is thus important that you consider formulating laws from the start before going into business.

The agreement should extend to the following aspects:

• It should show who the members of the company are and how much stake they own in the same. Some people may have more ownership than others and this should be clear in the document.
• The structure should be clear, showing who runs the operations. Will there be managers in charge or will members take up governing roles?
• The voting procedures (if any) should be clearly shown, including how much power the members have and if anyone has more voting rights than others
• The money spent by the members on the company should also be shown. Additionally, there should be rules as to how much capital future investors should bring in to join the structure.
• The sharing of profits and losses should also be clear as this can be a source of conflict in the future. You should decide on the pattern in place.
• Transfers of ownership should also be clear. Take the example of where one person decides to leave the company. Who should have priority over their shares?
• Dissolution of the company can also come about at some point. You should agree on the procedures to follow in such an event.

Drafting the agreement is quite an easy process and you can do it as follows:

• Yourself
• With an attorney
• LLC formation services

Want to learn more? Read our full Create an LLC Operating Agreement

Step 6: Open a Bank Account to Set Up an LLC in NJ

Separation is important when running a company, and this also extends to opening an account that solely deals with company revenues and expenses. The beauty of this is that if you get into legal trouble, the law can only come after what belongs to the business. However, without this separation, you can end up losing your personal finances as they would end up mixed with business assets. Thus, before you start transacting and receiving or sending money, you should open a business bank account. Below are some motivations behind having another account:

• It becomes easier for you to tell how much you have as revenue and how much you owe in taxes. Also, where you choose to hire someone to help with the reports, you will not have to pay for sorting as everything will be in one place.
• When transacting with such an account, you will exude professionalism which will earn you a good reputation in the industry. You will find that more people want to work with you, seeing as you appear to be credible.
• In time, you may require a loan to finance assets or expand your operations. Having such an account will make it easier for the financial institution to gauge your returns and make a decision. Plus, the long-standing relationship will work in your favor.

When opening an account, you need to look into which options are available. Many banks offer such services. However, they differ in their requirements and the charges to run these accounts. You should thus understand what they will need from you now and the costs you will incur in the future. The following documents will be necessary as pertain to your company: a Certificate of Formation, an EIN, an Operating Agreement and an ID (with one having a picture).

Depending on the laws in place, more than one member may need to be present for signing.

Want to learn more? Read our full Open a bank account for your LLC

Step 7: Tax Compliance

Federal Taxes

Whether you report your income or not comes down to the nature of your operations. Some companies have to while others can focus on other obligations. However, note that you will not pay your income tax to the federal government, but rather, report it. Reporting is possible through the filing of Form 1065 Partnership Return or Form 1040 Schedule C. Please note that the means of paying yourself from company returns also affects your tax implications. It would help to engage an accountant to help you with such decisions.

States Taxes

The tax you pay comes down to the structure and nature of your business operations. Payable taxes include sales, unemployment insurance and withholding taxes.

You will find that you enjoy flexibility regarding how you can pay your taxes, enabling you to reduce the amounts payable. You will also be happy to know that NJ does not impose any privilege tax and that does away with the need for registration in order to conduct business.

Licensing

Your license from the state should be all you need to get started on operations. However, you may need to apply for special permits if you engage in some industries. Take the example of someone running a restaurant. This person would require health and building permits. Thus, you may need to research the permits you will need and the applicable fees for the same.

Reporting

As per the law, you must submit an annual report on your revenue each year. This filing accompanies a fee of $75 and is due at the end of the month during which you formed the company. Say for example you form your business in June, the report will be due the next year by the end of the same month. On the upside, if you miss the deadline, you are not subject to any late fees. However, if you do not file for two consecutive years, you can lose your license.

Want to learn more? Read our full Taxes and license fees

---

FAQ About Establishing an LLC in NJ

---