Starting a New Jersey limited liability company (LLC) is one thing. However, operating it is another thing in its entirety. Before you open your doors to your clients and start raking in the profits, you must make sure you’ve complied with all the state requirements. First, you need to get NJ business licenses to operate your business. Secondly, you need to register to pay your taxes and understand tax filing requirements for New Jersey LLCs. Finally, when doing business in New Jersey, you need to keep the state up to date by filing an annual report. We will cover what all this means, how you can do it, and what happens if you don’t comply:
New Jersey LLC Tax Filing Requirements
Regardless of the structure of your organization, you are liable to pay taxes after forming an LLC in New Jersey. Please note that the amounts paid and how you do it will come down to how you opt to pay your taxes. For organizations where you are the only owner, the law treats you like an individual. You do not have to file on behalf of the business. Instead, you can add the LLC tax return to your personal returns for the year, simplifying the process. Ensure that you comply with the law when paying yourself.
If your organization has more than one owner, the law looks at it like a partnership that enjoys “pass-through” entities’ rights. Even so, the company does not pay any New Jersey tax return to the government. Once again, depending on how you share the profits, the NJ LLC taxes pass on to the individual owners. You pay these with your returns at the end of the year. Again, you have to make sure that you have done so in accordance with the law. Most organizations have agreements on how to share the profits and this guides how much each person gets.
Federal Taxes
You have to keep up with the federal law on reporting what you have made each year with the IRS. To do this, you will need to file form 1040 which has three categories. In the first one (personal 1040 tax returns and/or Schedule C), you detail what you have made from the business operations. The second one covers what has gone into self-employment taxes while the third covers monies made from income-producing assets. Generally, this is all you have to do if you own the organization by yourself. However, if more than one person has shares in the company, you also have to report your profits and losses from the business and how you have shared these among the members. Make sure you fill the correct form per your structure.
State Taxes
Thanks to the pass-through effect of LLCs, you will not be liable to pay taxes specific to the state separately from what you have reported. That means that you as the owner will pay the monies required, but not the business, by filing IRS Form 2553 with the IRS. Luckily, New Jersey is very straightforward about what you have to pay and thankfully, does not impose a franchise tax on businesses, per the Federal Franchise Laws. For more information, you can visit the DOT website and familiarize yourself with what you have to remit each year.
Additional Taxes
You need to look into whether any of the following apply to you and where you can register an NJ LLC with the Division of Taxation to start making payments:
- Sales Tax and Use Tax: This applies to you if you will deal with physical goods. Once you have registered with the state, you will have the right to collect NJ LLC taxes on behalf of the government. You will then remit this to the government periodically.
- Withholding Tax: This money comes out of your payroll and goes to the government to cater to employee needs. You need to register with the Department of Labor and Workforce Development to start withholding these monies.
- Unemployment Insurance Tax: This money goes into unemployment benefits, and the rate depends on the state.
In addition to the above amounts and State Employer Taxes, it’s important to check with the government on any local/municipal taxes to which you may be subject. Having a clear idea of specific business-related taxes can help you price your items better and plan your remittance early in the year.
New Jersey Business License
Registering a business does not give you the right to start your operations. Instead, to make your business legitimate, you must also obtain a license. For example, if you want to start a restaurant, a public health officer must inspect your facility and decide if it’s fit for restaurant activities. You can then get a permit for this. Different businesses require different permits and you need to know what applies in your case.
Typically, permits apply on the state, local, and federal levels. On the state level, as you form a New Jersey LLC, you will need to indicate if you will deal with taxable goods or services. The authorities will then issue you with a permit to collect monies on their behalf. For businesses that have professional services, you will need to get industry and professional licenses for this e.g., dental services. The NJ License & Certification Guide has more insights on this.
At the local level, you will need to check if you need any paperwork. It’s easier to find out by contacting your county or municipal government office. They will walk you through possible documents and fees payable for the same. You can also use the Licensing Boards and Committees page as a point of reference.
Please note that operating without a permit can land you in legal trouble, hurt your reputation, and even lead to the termination of your operations.
New Jersey LLC Annual Report
When you first start your New Jersey business, you will provide the authorities with basic details about your operations. This information will be sufficient to decide if you can operate in the state or not. As you start working, you will change some key aspects of your business. You might move to another part of town, change your point of contact, or even change the manager. As this happens, you need to make sure the authorities are aware of such changes, hence the need for the report. It makes it easier for the state to keep tabs on you and is not something you can escape.
In it, you show your company’s name, where you have your main office, who is your point of contact and the details of your members. Please note that this report applies to both domestic and foreign companies. Take an example of where you change your point of contact. If the authorities are not aware of this change, they can end up sending important documents to the wrong person. You would not receive them and can miss important deadlines that can affect your business. Plus, it also enables future partners and investors to look up updated records online. They can gauge how compliant you are and decide to get into business with you based on this alone.
You will pay a $75 filing fee each time you file an annual report. It’s better to make sure you get the details right to avoid paying this fee over and over again as you correct any mistakes. Also, here’s a tip- you have to make the report each year. Now would be a good time to note down this recurring cost and put it in your budget.
The deadline is very important. More often than not, the authorities will send you a reminder that the date is coming up a few months before the date. However, if they miss it, you should note that you will do it on your anniversary month. Here’s an example. If you register your business on 3rd April next year, the report will be due by the end of April the following year.
Are there penalties? Yes! It might be easy to put off paying the fee or filing the paperwork and scheduling it for another time. While you will not pay a late fee, it disrupts your good standing business status with the authorities. If you don’t file for two consecutive years, you will no longer have a business- the authorities will terminate your operations. It might seem like a huge leap but two years can go by just like that. Put a reminder in your diary.
You do not have the option to file your documents by paper. Instead, you can only do it online through the Division of Revenue’s online filing portal. It’s easy to follow the prompts on the DOR’s On-line Corporate Annual Report website and once you make your payment, you can submit the document.
Conclusion
Once you have completed all the milestones above on taxes in New Jersey, you will be good to go and can operate your business without any hitches. If you feel stuck in some areas, you can always hire a professional service to help with the report filing and NJ LLC Business Licenses and Permits. Business formation services often bundle this and point of contact services in one to help you solve all your business problems in one place. It’s worth your consideration.