You've probably already decided to form a Limited Liability Company (LLC) in New Jersey.
It's always thrilling to establish a new business or expand into a new state, so congrats!
I'll cover the fundamentals of what a Limited Liability Company (LLC) is, the advantages of forming an LLC in the state of New Jersey over another corporate business structure, and then everything you need to know about how to establish an LLC in this step-by-step guide.
(If you want to skip to the “How to Form an LLC” section, click here.)
What is a New Jersey LLC?
A New Jersey LLC is a Limited Liability Company formed in the state of New Jersey that is governed by the laws, regulations, and statutes of the state of New Jersey. An LLC is also a simple business structure with a lot of flexibility in how it’s managed and taxed.
Why Choose an LLC?
There are a number of benefits to selecting a New Jersey LLC over other business structures such as an S corporation, a C corporation, a sole proprietorship, a sole trader, or a partnership.
1. Limited Liability and Asset Protection
The first benefit is a pretty compelling argument in favor of an LLC in New Jersey rather than another business structure. In the state of New Jersey, a business owner is not personally liable for the liabilities and business debts of their LLC. This limited liability and asset protection is one of the most appreciated benefits of forming an LLC.
This ensures that if your New Jersey LLC is sued or declares bankruptcy, its creditors cannot pursue your personal assets, such as your vehicle or home. Their sole financial recourse for your LLC’s business debts are the assets of your Limited Liability Company (LLC). Personal assets and finances are protected, which grants many LLC owners some serious peace of mind.
This also means that if your New Jersey LLC goes out of business, you will not be left penniless and homeless, since you will retain the personal assets you had when you formed your LLC.
For Americans, the last several years have been difficult. We've seen an alarming number of natural catastrophes and unexpected events, all of which demonstrate that it takes just one random incident to ruin a company overnight, regardless of its profitability.
As a result, many business owners value the limited liability and personal asset protection that comes with owning a Limited Liability Company, which is a strong incentive to establish an LLC in New Jersey.
2. Privacy
Another benefit of forming an LLC in New Jersey is the opportunity to safeguard your personal information by keeping it private and out of the public eye.
Regrettably for everyone, hackers and con men have improved their skills considerably over the last decade or so. They are now capable of stealing your identity using insignificant pieces of information (such as your name and address). They may quickly accrue thousands of dollars in debt in your name, and you will likely be unaware until it is too late.
If you select a sole proprietorship as your business structure, you must register your information with the New Jersey Department of Treasury, Division of Revenue and Enterprise Services (DORES). The Department of Treasury, Division of Revenue and Enterprise Services office will then publish the information on their website, thus making it public. This implies that anybody may access your information, even those who want to exploit it for illegal purposes.
However, when you form an LLC, you have the choice to protect all your personal information.
You can accomplish this by using what is referred to as an LLC formation service. Along with offering all the business formation services necessary to register your New Jersey LLC with the Department of Treasury, Division of Revenue and Enterprise Services, they also register their own information with the DORES, ensuring that yours stays private and out of reach of criminals.
Northwest Registered and ZenBusiness are the two LLC creation services I often suggest.
3. Taxation
The third most common reason for establishing an LLC in New Jersey is the tax advantages that LLCs enjoy that other business entities do not. These advantages are immediately evident when comparing the taxation of LLCs to corporations.
If you own a corporation, you will face what is referred to as “double taxation.” The following is an explanation of how companies are taxed:
Profits earned by a company are taxed at corporate rates before being distributed to corporate shareholders as dividends. Dividends are taxed at the time they are received, which means that corporate earnings are taxed twice before they can be distributed to shareholders, which is why it is referred to as “double taxation.”
Establishing an LLC ensures that you will avoid “double taxation” completely. Here’s how LLCs are taxed:
Profits earned by LLCs are taxed at company rates (which are usually lower than corporate rates) and then distributed as personal income to LLC members. Personal income tax is paid when an LLC member files their personal tax return. LLCs themselves are considered “pass-through entities” and are generally exempt from federal taxes.
Believe it or not, LLCs have extra tax advantages in addition to avoiding “double taxation.”
The Qualified Business Income Deduction (QBID) was included in the 2017 Tax Cuts and Jobs Act. This deduction is a 20% tax break that is available only to LLCs, which means that your company will not qualify if you select another business structure. This is another compelling incentive to establish a New Jersey Limited Liability Company.
How to Start an LLC in New Jersey
Now that you understand what a New Jersey LLC is and why people form them, you can make a more educated decision about whether forming an LLC is in your business's best interests. If you're still considering establishing an LLC, these are the procedures to follow in New Jersey.
*IMPORTANT* If you’re unfamiliar with LLC formation or are worried about the procedure, don’t worry. There are many expert services available to help you.
They're called LLC formation services and they assist you with creating, filling out, and submitting all required papers, as well as ensuring that you pay all applicable filing fees, safeguarding your personal information, and legally establishing an LLC with the New Jersey Department of Treasury, Division of Revenue and Enterprise Services. They charge as low as zero dollars in addition to the filing fee. However, Northwest Registered Agent, which costs $39 plus state filing fees, is my favorite LLC formation service.
If you're looking for more advice on how to navigate the formation process and protect your personal information, check out my guide to the best LLC service.
1. Obtain Public Records Filing for New Business Entity Form
To begin the process of establishing an LLC, you must acquire the Public Records Filing for New Business Entity (Form NJ REG) form from the New Jersey Department of Treasury, Division of Revenue and Enterprise Services.
You can fill out a preprinted form from the Division of Revenue's website (here) and submit it by postal mail or fax. Alternatively, you may use the Division of Revenue's Business Formation website to file online. There is a $125 filing fee that must be paid at the time of application. If you file online and pay using a credit card, you'll have to fork out an extra $3.50.
Due to the fact that the Public Records Filing for New Business Entity form is the main formation document in the state of New Jersey, the following stages will make reference to it:
2. Choose Your Business Name
The name of your LLC will be one of the first items on your Public Records Filing form.
Sadly, you can't just submit the first name of your LLC that comes to mind. In New Jersey, LLCs are required to have a business name that distinguishes them from all other businesses in the state, which means that if another business is already using the business name you want, it is not available. You may check the availability of your chosen LLC name by visiting the New Jersey Business Record Service business name database.
An LLC's name must include the words “Limited Liability Company” or the abbreviation “L.L.C.” under New Jersey law. The name of your LLC must be distinct from that of other business organizations currently on file with the New Jersey Division of Revenue and Enterprise Services.
Once you have determined an appropriate and available name for your New Jersey LLC, you may submit an Application for Reservation of Name with the New Jersey Division of Revenue and Enterprise Services. The Name Reservation form cannot be filed by mail; however, it may be filed online at the Business Charter Amendment Service website in New Jersey. You will also need to pay a $50 filing fee.
If you are dissatisfied with the LLC name you registered with the New Jersey Division of Revenue and Enterprise Services, you may use a fictitious business name, also known as a trade name or “Doing Business As” (DBA). This is the name that will appear on your business's advertising, website, and other marketing materials. To do business in New Jersey under a fictitious name, you must complete a Registration of Alternate Name form, which you may file online here. You may also submit the paperwork through postal mail, and you must renew your trade name registration every five years. It costs $50 to file.
3. Choose a New Jersey Registered Agent
The registered agent for your LLC is the next piece of information that must be included on your New Jersey Public Records Filing for New Business Entity.
In New Jersey, every LLC is required to appoint a registered agent. This is an individual or business entity that has been authorized by the New Jersey state government to receive legal papers (such as service of process) on behalf of your LLC. When appointing a registered agent for your LLC, the individual must be a New Jersey resident.
Taking on the role of registered agent yourself has certain risks. As a registered agent, you must be available to receive legal papers and service of process in person on behalf of your LLC during normal business hours if you prefer to act on your own. This may make everyday operations more challenging if your office and mailing addresses are different. Additionally, if you want to serve as your own registered agent, you must provide your name and address on the Public Records Filing for New Business Entity form. This information will subsequently be made public, undermining the previously stated privacy advantages of establishing an LLC. Additionally, having your personal information on the public record exposes you to cybercriminals.
These risks are avoided if you hire a professional service to serve as your registered agent. A professional registered agent service is a business entity, either foreign or domestic, that is authorized to provide registered agent services in the state of New Jersey. This kind of professional service usually costs between $99 and $299 each year, but it is well worth the price.
Another advantage of choosing a professional agency to serve as your registered agent is the privacy protection stated before. Rather than your name and address being included on your Public Records Filing for New Business Entity, the registered agent service will use their business name and address. This keeps your information private and out of the public domain.
Given the risks involved with serving as your own registered agent, I always suggest that new LLC owners use the services of a professional. Read more in my review of the best registered agents in New Jersey.
4. Choose Your LLC Address
Another critical piece of information you'll be required to provide on your Public Records Filing is your LLC's address. Each LLC and business in the state of New Jersey must have a registered office address with the New Jersey Department of Treasury, Division of Revenue and Enterprise Services. This address will then be displayed on their website.
If you choose not to utilize an LLC formation service or registered agent and your company maintains a physical address in New Jersey, you must register that address. If you do not have a physical location for your company, the only choice is to include your home or office address, which is not ideal. The New Jersey Department of Treasury, Division of Revenue and Enterprise Services will not accept a PO Box address on the Public Records Filing for New Business Entity form.
If you've retained the services of a registered agent, you won't need to worry about the address to provide on the Public Records Filing for New Business Entity form. The registered agent service will provide their own address on the form, which secures your information and safeguards against identity theft.
5. Sign and File Your Public Records Filing for New Business Entity
After gathering the necessary information and completing the New Jersey Public Records Filing for New Business Entity form, it's time to sign and submit your Public Records Filing with the New Jersey Division of Revenue and Enterprise Services.
Verify that your Public Records Filing is correct and contains the following information prior to filing:
- The name of the LLC
- The three-letter code for domestic LLCs in New Jersey—”LLC”
- The reason for which the LLC was formed
- The date of the LLC's dissolution, if any
- The name and New Jersey street address of the LLC's registered agent
- The signature of any authorized representative
After verifying that your form has all the required information and is complete, you may file online with the New Jersey Treasury Department's Division of Revenue and Enterprise Services, along with a $125 state filing fee. Online filings entail an additional $3.50 fee. Alternatively, you may submit this form by mail to the following address:
Division of Revenue and Enterprise Services/Corporate Filing Unit
New Jersey Department of the Treasury
PO Box 308
Trenton, NJ 08646-0308
After filing your LLC formation documents with the New Jersey Division of Revenue and Enterprise Services, you can expect a waiting period of 1–3 business days. If you would prefer faster approval, expedited processing is available for a fee of $25. If you opt for expedited processing, your documents will be approved within 24 hours.
Other LLC Activities
Following the completion of your Public Records Filing for New Business Entity form, there are a few more steps to ensure that your New Jersey LLC gets off to a good start.
Limited Liability Companies (LLCs) must submit an annual report with the New Jersey Division of Revenue. Annual reports must be filed by the end of the anniversary month of the LLC’s formation. Annual reports must be filed online through the New Jersey Division of Revenue's Annuals and Change Services website. A filing fee of $50 is required.
Additional business licenses will almost certainly be required, depending on the location of your LLC and the kind of business you want to conduct. Before you begin, check with the city or county clerk in the region where your LLC is situated to see if you need any local licenses. To learn more about the state business license requirements in New Jersey for your Limited Liability Company, visit the New Jersey Online License and Certification page.
If your LLC will provide professional services, such as legal or accounting, you must complete the Professional LLC or PLLC formation procedure. Professional Limited Liability Companies (PLLCs) are restricted to delivering a single kind of professional service, and all members must have the necessary business licenses and permits, or be registered with the state, in order to provide the licensed professional service for which the LLC was formed. As part of the LLC creation procedure, you may be asked to submit a copy of each LLC member's applicable business license or state registration.
If your LLC will sell goods, collect sales tax, or employ individuals, you must register with the New Jersey Division of Revenue (DOR). Even if your LLC will not be collecting sales tax or employing anybody, you must register with the DOR for tax purposes. You may register online by visiting the DOR's website at this link. Registration must occur within 60 days of the date on which your LLC formation papers are filed.
If your LLC is based outside of New Jersey and intends to grow into the state, or if you are not a resident of the state, you must follow the process for establishing a foreign LLC. This process is almost identical to that for forming a domestic Limited Liability Company. The primary difference is that you must file an Application for Limited Liability Company Registration. Additionally, you must submit a Certificate of Good Standing from your home state when your foreign LLC registration documents are filed. Additionally, you must appoint a registered agent with a physical address in the state of New Jersey. The application cost is $125 and it may be submitted online or by mail.
Before filing, check the New Jersey business name database to verify that the foreign Limited Liability Company's name is accessible. If the chosen name is not available, the foreign LLC must register a trade name to be used in New Jersey with the Division of Revenue and Enterprise Services. You must submit a Reservation of Name Application along with a $50 filing fee. Applications may be submitted online or by mail.
Expert assistance is available if this is your first time filing an annual report or applying for a company license. A New Jersey PEO service may be able to help you with submitting your annual report and other documents, and online legal services may also be able to assist you with extra paperwork.
New Jersey LLC Fee Summary
How much does it cost to form an LLC in New Jersey? Whether you use an LLC formation service to help form your LLC or not, you’re going to encounter some fees and taxes. Here’s a list of some of the charges you can expect to pay when forming an LLC in New Jersey:
Public Records Filing for New Business Entity: $125, plus $3.50 for online filing
Name Reservation: $50
Registered Agent Fee: $99–$299
Annual Report: $50
State Personal Income Tax: 5.535%–8.97%
State Corporate Income Tax: 11.5%, minimum $125 per LLC member
After Starting Your New Jersey LLC
Establishing an LLC in New Jersey is a major step, so take time to celebrate with a beer or glass of champagne, a long walk, or a stroll along a local beach, but avoid becoming too relaxed. You are still unprepared to run your New Jersey Limited Liability Company.
Before you can establish the necessary foundations, there are three more steps you must complete to guarantee your LLC stays in Good Standing.
Step 1. Create an Operating Agreement
While New Jersey LLCs are not required by law to establish or adopt an LLC Operating Agreement, doing so is in the best interests of your company.
If your LLC does not have an Operating Agreement, it will be controlled solely by the state of New Jersey's business and LLC rules and regulations, which may or may not be advantageous to your firm's operations. By adopting an Operational Agreement, you may create operating processes and standards that exceed the requirements of state law, which often only addresses the bare minimum.
*IMPORTANT* Before you begin drafting the Operating Agreement, you must determine the management structure for your LLC. The default for multimember LLCs is a member-managed voting system, whereas single-member LLCs often leave all the power with the owner. If you or any of your LLC members lack management experience, you should opt for a manager-managed structure. Your LLC delegates power to make high-level choices to managers instead of making them yourself under this arrangement. If you choose this managerial style, it is essential that you ensure each manager is competent and trustworthy.
Operating Agreements provide guidelines and procedures for how members, managers, and departments of your LLC interact with one another, as well as their respective responsibilities and obligations. Without Operating Agreements, LLCs are severely limited in their capacity to function.
Additionally, an Operating Agreement acts as a contract between members, explicitly defining their individual responsibilities and degrees of power. Operating agreements that are poorly written often include unclear or deceptive wording, causing conflicts between LLC members and departments. A poorly written Operating Agreement may also exclude procedures for onboarding new members and distributing shares and responsibilities in the case of a member's exit, limiting your business's growth.
To avoid these situations, ensure that the rules in your LLC Operating Agreement are as explicit and thorough as possible. A well-written LLC Operating Agreement should describe each LLC member, their profit and loss share, their responsibilities and authority level, and how they should interact with the different divisions of your LLC in New Jersey. If your LLC has managers, the Operating Agreement should include standards and procedures defining their authority and responsibilities. A well-written Operating Agreement that includes clear instructions and thorough operating procedures will streamline your company's daily operations, enabling you to relax while your business grows.
If this is your first time drafting an Operating Agreement, many LLC formation services offer assistance with the process as part of their service package. Consider subscribing to an online legal service if you just need assistance with the language. Additionally, Northwest Registered Agent offers a free Operating Agreement template on their website, which you may get by clicking here.
Step 2. Apply For an Employer Identification Number
Most businesses engaged in the collection of sales tax or hiring of employees will need to obtain an Internal Revenue Service (IRS) Employer Identification Number (EIN), including the collection of New Jersey sales tax and the hiring of employees. Single-member LLCs that choose to be taxed as a corporation instead of the default tax status, in addition to multimember LLCs, are also required to obtain EINs.
Your EIN also serves as a means of identifying your company in the same way that a Social Security Number serves as a means of identifying you as an individual. An EIN is also required for any business that is subject to payroll taxes for its employees.
To register for an EIN, simply visit the Internal Revenue Service's website (available here) and complete the EIN application between the hours of 7 a.m. and 10 p.m. Monday through Friday, followed by applying for your New Jersey LLC's EIN.
Step 3. Open a Business Bank Account
To provide the proper foundations for your New Jersey business, you must create a separate bank account for your LLC.
Many New Jersey company owners skip this step due to forgetfulness or inexperience, but it is critical enough that you will be happy you did.
Numerous LLC and small business owners conduct business and personal financial transactions via their personal bank accounts, under the mistaken assumption that having a single bank account for several purposes is convenient or saves time. There are, however, many reasons why this is a bad idea.
The first reason is that it greatly complicates filing state and federal income taxes. Many company owners who use their personal accounts for both personal and business transactions think they will be able to tell the difference when tax season arrives. However, federal tax returns are frequently filed several months after these transactions occur, and the passage of time only adds to the difficulty of remembering; thus, unless you wish to keep a detailed ledger documenting all your business transactions for tax purposes, it is simpler to open a business bank account.
The second reason you should avoid doing business transactions for your LLC in New Jersey via your personal bank account is that you lose the personal asset and liability protection for any money in the account. By conducting your LLC's financial operations via your personal bank account, you completely negate the personal liability protection afforded by an LLC for any money in your bank account.
In summary, you should open a bank account for your LLC to streamline tax filing and protect your personal information and assets.
To open a bank account for your LLC in New Jersey, you will need a “bank kit.” Numerous formation documents are included in a bank kit, including your Public Records Filing form, Operating Agreement, EIN, and a copy of your LLC's initial resolution. While you may collect all these documents independently, many LLC formation services include bank kits as part of their services.
In Summary
Congratulations on taking such a significant step for your business by forming a New Jersey LLC today!
If you've decided to establish an LLC on your own without the help of an LLC formation service, the following steps will apply:
- Obtain the Public Records Filing for New Business Entity form.
- Name your LLC.
- Choose your Registered Agent.
- Choose your LLC address.
- Sign and file your Public Records Filing for New Business Entity.
Creating a New Jersey LLC is time consuming and may be stressful at times. There are a variety of forms to file, papers and applications to collect, prepare, and submit, an endless list of filing fees to pay, and a perilous sea of red tape to traverse. However, if you do this task on your own, you will be surprised at how satisfying the sense of accomplishment is.
Again, congrats on your choice to form an LLC in New Jersey and the best of luck with your future business endeavors!