It’s no surprise that LLCs are the most popular business structure among American business owners. They offer a plethora of tax benefits, they don’t have complicated structures, and of course there’s the protection of personal assets they provide, all of which make an LLC preferable to a corporation to many people. But like incorporation, LLC formation requires not only a lot of paperwork, but waiting for it all to be processed. In this guide, we’ll discuss what you need to know about doing business in New Jersey, how to start an LLC in the state, and how long it takes to get an LLC in New Jersey.
Discovering New Jersey
New Jersey is teeming with interesting history and facts. During the American Revolution it was the site of the most battles. The famous painting of George Washington crossing the Delaware River, he actually reached the other side in Trenton, New Jersey to defeat the opposing forces.
New Jersey shares borders with Delaware, the Delaware Bay, the Atlantic Ocean, New York and Pennsylvania. Its geography features forests, low hills, narrow valleys, salt marshes, lakes, and mountains.
The state’s natural resources include sand, granite and gravel produced from mining. It’s also one of the nation’s leading seafood producers, clams in particular.
Economic Overview of New Jersey
New Jersey’s GSP (Gross State Product) is $586.8 billion, and it had a growth rate of 22.5k% from 2018-2023. The largest industries in the state by revenue are Drug, Cosmetic & Toiletry Wholesaling, Life Insurance & Annuities, Automobile Wholesaling, and Public Schools. The companies that employ the most people in New Jersey are Amazon.Com, Inc., Wakefern Food Corporation, RWJBarnabas Health, Hackensack Meridien Health, and Walmart Inc. And the sectors that contribute the most to the state’s GDP are Real Estate & Rental & Leasing, Professional, Scientific & Technical Services, Wholesale Trade, Healthcare & Social Assistance, and Manufacturing.
Business Environment in New Jersey
According to a study put out by Usnews.com, New Jersey ranks #25 in the country for business environment, #48 for affordability and #10 for economic opportunity.
The cost of living index is 109.1 (100.0 nationally), the median household income in the state is $89,296 ($69,717 nationally) and the poverty rate is 10.2% (12.8% nationally).
It also says that 50.1% of residents are college educated, which is a little over half the adult population.
CNBC gave it the high accolade of the most-improved state for business in 2023. This is because it’s received credit rating upgrades, enjoyed a state record budget surplus, the economy is seeing growth, and the housing market is doing well.
But the survey also lists that New Jersey has the second-worst debt rating in the country. It’s got the highest cost of doing business, and its business friendliness ranks low.
State-Specific Regulations and Incentives for Forming an LLC in New Jersey
Here are the incentives and programs for business creation in New Jersey.
- Emerge Program: This is a job creation program and it offers tax credits against insurance premium taxes and corporate income for companies that create and retain jobs in the state. The tax credits are issued per job, and range from $500-$4,000 per job per year up to 7 years. On top of that, many businesses also qualify for bonus awards for other eligibility factors, such as their wages and capital investment, industry sector, project location, and the number of jobs they’ve created or retained. The awards for retained jobs aren’t as high as those for new jobs. The amount of jobs that businesses are required to create or retain is based on the type of project and their industry. So, while one small business in a particular industry will be required to increase its workforce by 25%, a small business in a targeted industry may be required to create 25 jobs. Many businesses are required to create 35 jobs to qualify. If they’re in an economically distressed region, then projects are required to retain 500 jobs, while businesses in other locations are required to retain 1,000 jobs. There’s also a minimum investment to be met, which is lower for renovation than for new construction, specifications for the wages of construction workers on projects, and a minimum for “green building” design elements that must be met.
- Aspire Program: Developers that can prove that their projects need a subsidy to bridge a project financing gap can qualify for a tax credit against both corporate income and insurance premium taxes. It’s limited to the amount they need to bridge the financing gap, and amounts to being 45-50% of the total project cost over a period of time up to 10 years. The maximum amount that can be awarded is between $42-60 million. If a residential project applies for both a Low Income Housing program and the Aspire program can get a bigger award, with maximums up to 60% of their project costs, which is designed to encourage the creation of affordable housing in the state. If a project qualifies as “transformative”, then it can give it access to a higher award maximum, which can be up to $350 million per project, as well as other features that can help to complete large scale development projects. It’s worth noting that this is a discretionary program.
- Urban Enterprise Zone (UEZ) Sales Tax Exemption: If a business signs a new lease or purchases property in 32 communities that the state of New Jersey has designated as an Urban Enterprise Zone, it can qualify for a sales tax exemption on certain purchases.
Pros and Cons of Establishing an LLC in New Jersey
There are some drawbacks to doing business in New Jersey.
New Jersey is an insanely expensive state to do business in. Forbes named New Jersey and New York the states with the worst business tax climates in the nation. The top corporate tax rate is 11.5%, state sales taxes are 6.63% and property taxes are 4.98%. And you may be thinking “But I own an LLC and I’m not taxed as a corporation, so the corporate tax rate doesn’t apply to me”. Some LLCs decide to be taxed as an s-corporation or c-corporation because it’s cheaper in some instances. But even if you’re taxed on your personal income taxes as a pass-through entity, the top income tax rate in New Jersey is 10.75%. New Jersey’s minimum wage also reached $14 an hour recently.
There’s a definite lack of programs and incentives for business owners. We’ve written about the incentives for new LLC owners in every state, and we can confidently state that New Hampshire definitely has one of the shortests lists we’ve seen so far.
But there are some silver linings, as well.
New Jersey taxes multi-member LLCs as partnership LLCs, which provides some tax benefits beyond simply avoiding double taxation.
The labor market is well-educated. There’s been an uptick in the number of degrees that New Jersey universities have awarded in recent years. There are more female and people in minority categories who are getting degrees, too, which means the workforce is not only well-educated, but diverse.
The state may be small in size, but it’s so densely populated that every last county in the state qualifies to be an urban area. You’re not likely to find a place in the state that doesn’t get high traffic and a potential for profit.
Procedure of Establishing an LLC in New Jersey
This section will tell you everything you need to know about how to form an LLC in New Jersey. Let’s start with step-by-step instructions.
- Get a Public Records Filing for New Business Entity Form: Yes, the name of that form is a mouthful, but it’s critical because it’s the first step you need to take to form your LLC. It’s a lot like your application for LLC approval. (Called a Certificate of Formation in some places.) You can pick one up from the New Jersey Department of Treasury, Division of Revenue and Enterprise Services.
- Run a Business Name Search: You need to pick a business name, but it’s legally required to be different from other business names in the state. That means you can’t use a business name if another business owner is already using it. To find out if it’s available, head over to the New Jersey Business Record Service website and perform a search on the business name database. Once you have one that’s available and meets all of the legal requirements, (like containing “LLC” or “Limited Liability Company”), you need to file an Application for Reservation of Name form, too.
- Choose Your Registered Agent: Every LLC in New Jersey must have a registered agent, or someone who will accept official correspondence from government agencies and legal notices like service of process at their address for your company. You can choose an individual, like a friend, family member, or employee, or hire a professional registered agent service.
- Decide on an LLC Address: Your business address might seem simple, but it really isn’t. It’s public information, so if you don’t want to put your home or personal address on the internet for everyone to find in connection with your business and deal with all of the security and privacy risks that come along with that, you should probably seek other alternatives. Your registered agent may allow you to use their address, and many states allow you to use a virtual address. The one thing you aren’t allowed to use is a P.O. Box because it must be a physical address in the state.
- Sign and File the Public Records Filing for New Business Entity Form: Once you’re sure that your form has all of the requested information and that it’s all accurate, it’s time to sign and file it with the New Jersey Department of Treasury, Division of Revenue and Enterprise Services Corporate Filing Unit.
Necessary Documentation for Filing an LLC in New Jersey
There are several forms of documentation you’ll need to gather before filing for an LLC in New Jersey. Here’s a look at what you need:
- Public Records Filing for New Business Entity Form: This is your an important formation document because it’s your application with the New Jersey Department of the Treasury, and it will register your business’s information with the state. Some of the information you’ll need to provide includes your business name, duration, purpose, business address, and contact information for your registered agent. You’ll also need to provide a list of LLC members and contact information for each LLC member, and specify whether your Limited Liability Company is member-managed or manager-managed.
- Operating Agreement: You’re not legally required to create an operating agreement to own an LLC, but that doesn’t mean you don’t need one. It’s highly recommended that you have one and file it with your Public Records Filing For New Business Entity form. It doesn’t just tell the state government how your business will run, it’s instructions for LLC members, as well as a contract between them, and you’ll likely refer back to it a lot. It will include contact information for your LLC members, list their contributions, describe their shares of ownership, explain the distribution of profits and losses among them, and provide an explanation for what to do if an LLC member dies, as well as how to add or remove a member. It also needs to include information about managers, voting rights, and meeting schedules.
- Name Reservation Application: Once you’ve decided on a business name that other businesses aren’t using, you need to file a name reservation application with the New Jersey Division of Revenue and Enterprise Services, and you need it when you file for your LLC.
- Employer Identification Number (EIN): An Employer Identification Number, or EIN, is a number that identifies your business to the IRS and government agencies. You need one to perform certain activities, like opening a business bank account, applying for certain incentives, filling out tax paperwork, and hiring employees. You can get one for free from the IRS website.
- Tax Registration: Within 60 days of your formation date, you must register your LLC with the New Jersey Division of Revenue for tax purposes (collecting sales tax, etc).
- Business Licenses: You’ll need a business license from both the state of New Jersey, as well as local governments. Check with the county clerk in your area to find out more about business license requirements. And you’ll need to visit the New Jersey Online License and Certification website for state licenses.
Legal Requirements for Starting an LLC in New Jersey
There are a few legal requirements you’ll need to meet to start your New Jersey LLC.
Any Limited Liability Company must have a registered agent. In fact, you’ll find that it would be incredibly difficult to even complete your Public Records Filing for New Business Entity form without listing your registered agent and including their information. Your registered agent has requirements they need to fulfill, too, like being at least 18 years of age and having a physical address in the state of New Jersey.
Every LLC in New Jersey must file an annual report each year. It’s a way for the Division of Revenue to ensure that your business information is up to date in their system. It must be filed by the end of whichever month you formed your LLC in every year, and can be filed online with the New Jersey Division of Revenue Annuals and Change Services website, along with a filing fee of $50.
Time Frame for Establishing an LLC in New Jersey
Now that you know more about the formation process, this section of the guide will tell you what you need to know about the formation times in the state.
How Long Does the Initial Paperwork Take in the State of New Jersey?
The first thing you need to know is that approval times are the entire length of time it takes from the time you submit your paperwork until your LLC is approved, which includes processing times. The approval time to file by mail is 2-3 weeks in New Jersey, or one business day if you file online.
Processing Times in the State of New Jersey
Processing times for mail filings are 5-7 business days, or one business day for online filings.
Common Delays in the LLC Formation Process in New Jersey
A number of factors have the potential to slow down the formation process.
- Filing Volume: The end of the year and the beginning of the year see the most LLC filings. You may not be able to avoid filing at these times of year, so you need to be aware that these high filing volumes can bog down the staff and cause a bit of a delay.
- Document Errors: Guidelines for your formation documents are very strict. All of the information must be filled in with no empty sections, and it must be correct, and you have to have the correct number of copies (typically two). If you leave any sections blank, include incorrect information or even make typos, or don’t attach two copies, then your application could be rejected. And while you scramble to fix the errors and re-submit your paperwork, that adds time to the formation process.
- When You File: It’s important to remember that your filing won’t be processed on government holidays or weekends. Filing on or just before these holidays could cause a delay because people are definitely not going to come in to work simply to process your filing!
Expedited Processing for LLC Formation in New Jersey
Expedited processing is the quickest choice if you want to form an LLC as soon as possible. Here’s the details you need about New Jersey’s expedited processing.
What Are the Expedited Options Available?
Unfortunately, there aren’t expedited processing options available for online or mail filing in New Jersey.
Additional Costs for Expedited Services in New Jersey
Ordinarily, you’d be required to pay an extra fee on top of the filing fees for expedited processing. But since there aren’t any expedited processing options in New Jersey, you don’t have to pay any extra fees for it.
Comparing LLC Formation Time Frame in New Jersey with Other States
To fully grasp how fast or how slow your state processes filings, we’ll compare its formation time frames with other states.
Brief Comparison with Key States
In New Jersey, processing times for mail filings takes 5-7 business days. Processing time for filing online takes 1 business day, and there aren’t expedited processing options.
There are certainly slower states. For instance, the expedited process in Arizona takes 5 days, and it’s 7 days in Maryland. Online processing in Washington takes 12-14 days, Texas’ takes 13-15 days, and Arizona’s is 14-16 days. And for mail filing, New York’s processing time is 8 months, while Maryland comes in a close second at 5-8 weeks.
But there are faster times, too. Some of the states with the fastest expedited processing are West Virginia, Nevada, Montana, Michigan and Delaware, which all have one- hour processing, New York, which has 2 hour processing, Louisiana, which has 2-4 hour processing, and California with 4 hour expedited processing. Several states have immediate processing if you file online. And both Ohio and Kentucky can process mail filings in just one day.
Why is New Jersey a Favorable Place for Forming an LLC?
New Jersey is a favorable environment to start an LLC because of the unique way it taxes LLCs, its well-educated and diverse workforce, and its dense population. If you hire employees in New Jersey, you’re likely to find qualified applicants, and be able to qualify for lots of incentives for creating a diverse working environment. And the large population means lots of potential customers. Literally every county in the entire state is an urban area thanks to its massive population, and there aren’t many remote areas in the state that don’t get much foot traffic, which means brick and mortar stores will receive visibility in any area of the state.
