How to Form Your LLC in New Jersey
An LLC is a type of business entity structure that many small business owners prefer due to its tax benefits and flexibility, similar to a sole proprietorship, along with personal liability protection, similar to a corporation.
If you're considering forming an LLC, New Jersey is a great option. The state boasts a highly educated workforce, and real estate and office space are more affordable than in neighboring New York.
One of the major advantages of an LLC is that its owners, known as members, enjoy personal limited liability protection, as well as the tax benefits and flexibility of a partnership or sole proprietorship. Unlike traditional corporations, LLCs avoid double taxation, where profits are taxed both at the business level and again on the personal level.
Additionally, LLCs require less paperwork and formalities but still provide protection for members' personal assets in case the business faces lawsuits or debt.
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1. Name your New Jersey LLC
To name your LLC in New Jersey, you need to consider both creative and legal aspects. Choosing a business name can be an exciting puzzle to solve creatively. You may ask yourself if the name should describe your business, if it's catchy enough for potential customers, or if it's too cute, clever, or obscure.
On the legal side, it's essential to ensure that your business name is unique by conducting a search through the New Jersey business name search portal. In New Jersey, business names must be one-of-a-kind. Additionally, when forming an LLC in New Jersey, the business name must contain "LLC" or "Limited Liability Company," for example, "A Penchant For Peppers, LLC."
Since an online presence is critical, it's necessary to ensure that your chosen domain name is available. Even if you don't plan to launch your business right away, purchasing the domain name as soon as possible is recommended. You can search for and buy a domain on a platform like Google Domains, with prices varying by platform, domain popularity, and domain extension popularity.
2. Designate a Registered Agent
To form an LLC in New Jersey, you need to list a New Jersey Registered Agent in your Certificate of Formation, which is also known as your Public Records Filing, as required by the New Jersey Division of Revenue.
A New Jersey Registered Agent is responsible for receiving notices from the Division of Revenue and any legal mail, known as Service of Process, if your LLC is involved in a lawsuit. To be a Registered Agent, one should have a physical address within the state where Service of Process and other documents can be received. PO Boxes are not allowed.
There are three options for choosing your LLC's Registered Agent in New Jersey.
First, you can be your own Registered Agent.
Second, a friend or family member can be designated as your Registered Agent.
Third, you can hire a Commercial Registered Agent.
Choosing a Commercial Registered Agent is a wise decision if you don't have an address in the state or prefer to keep your address off public records.
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3. Complete the Public Records Filing
To create a New Jersey LLC, you need to file a Public Records Filing for New Business Entity with the New Jersey Department of Treasury, Division of Revenue & Enterprise Services. The filing must include essential information such as:
- the LLC's name
- the New Jersey three letter code for domestic LLCs (i.e., "LLC")
- the LLC's business purpose
- the LLC's dissolution date (if any)
- the name and address of the LLC's registered agent and
- the signature of any authorized representative.
The filing fee is $125, and an additional $3.50 is charged if you file online and pay by credit card.
4. Create an Operating Agreement
An operating agreement is a crucial document that lays out how your LLC will operate. Although New Jersey doesn't require LLCs to file an operating agreement, it is still necessary for your business.
A written operating agreement can help in resolving potential disputes that may arise over financial agreements and other legal matters.
In the absence of an agreement, courts make decisions based on state law, which may not be in the best interests of the LLC and its members.
The operating agreement should cover the following points, among others:
- Name and address of the LLC, including its principal address
- Duration of the LLC
- Name and address of the registered agent
- Details of the Certificate of Formation
- Purpose of the business
- Contributions of members
- Allocation of profits and losses
- Procedure for admitting or removing members
- Management of the LLC
- Indemnification and liability provisions.
5. Comply With Tax and Regulatory Requirements
Your LLC may be subject to additional tax and regulatory requirements. Some of these requirements include:
EIN: If your LLC has more than one member or employees, it must obtain its own IRS Employer Identification Number (EIN). You can apply for an EIN for free on the IRS website.
Business Licenses: Depending on the type of business, the State of New Jersey may require your LLC to obtain a license, certification, or registration.
To find out more, visit the New Jersey Online License & Certification website. Your LLC may also need to obtain a local business license from the city or county where it operates.
State Tax Registration: All LLCs authorized to do business in New Jersey must register with the New Jersey Division of Revenue, regardless of whether they plan on collecting sales tax or having employees.
To register, file a Business Registration Application, Form NJ-REG with the Division of Revenue. The form can be submitted online or by mail.
The initial Public Records Filing should be submitted before filing the Application, and the Application filed within 60 days thereafter. New Jersey LLCs must pay an annual minimum state tax of $125 per member.
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