The state of New Jersey offers incentives to small business to do business in the state in many ways. The Urban Enterprise Zone or Work force training programs by the state have positively impacted many New Jersey businesses in their growth and development. NJ incorporation is possible by filing the required Certificates of Business information with the Division of Revenue. You may file online or through paper documents and pay the filing fees to obtain authorization to conduct business in the state. As to why incorporate, the corporation has many advantages over other forms of business. The main advantage is that corporations are perpetual and investors contribute more readily because of the easy transferability of stock or shares in a corporation.
Forming corporation in New Jersey can be accomplished by filing Certificate of Incorporation and submitting Business registration application with the New Jersey Division of Revenue. The basic requirements for forming a corporation in New Jersey are:
Corporate Name: You must determine that the name you have selected for your corporation is available for use before filing the certificates of information for business registration. The name must not be similar to an existing New Jersey business entity. You must also not include terms and language prohibited by the state statute. The name availability check is automatic if you are filing online.
Certificate of Incorporation: The certificate should contain certain basic information regarding the corporate organization. It should list (1) the name and address of one director at the least. If there is more than one director, all their names and addresses must be listed (2) the aggregate number of shares, each class of shares and the privileges assigned to each class (3) the registered office address of the corporation, which must be a NJ street address (4) the designated registered agent and his New Jersey communication address. There can only one registered agent for a corporation. The certificate of incorporation may include additional information optionally if you wish to formalize them.
Bylaws: The directors must hold the first meeting and adopt the bylaws of the corporation. The bylaws are the charter under which the corporation will function and operate its business.
Your corporation can elect to be a C Corporation or an S Corporation under New Jersey Statutes. The C and S are not different corporate business structures but tax classifications. The C Corporation is subject to corporate tax; it has to pay federal and state income tax on profits from business directly. When the profits are distributed among the shareholders, they pay tax on that as their personal income. S Corporation advantages are, it has a lower corporate tax and has a pass through taxation. The shareholders pay tax on their share of profits through their personal tax returns.
The limited liability company formation does not allow you to form a LLC corp. The reason for this is that an LLC is a separate business structure. The LLC is a hybrid of a partnership and a corporation. When you are forming a LLC, you are choosing the LLC business structure because it provides you with the taxation benefits of a partnership, but provides you with the protection of a corporation.
The closet that you can come to forming LLC corporations is choosing to have your LLC taxed like a corporation. By choosing to have your LLC taxed like a corporation, you will be receiving the protection that is available to corporations and receiving the same tax benefits that corporations receive, but your business will be an LLC instead of a corporation.
One of the benefits of forming your LLC this way is that it saves you time on paperwork, but it can also save you money. Forming a corporation is more expensive than forming an LLC because of the filing fees and the amount of paperwork that has to be filed. With an LLC, the only paperwork that you have to file is your articles of organization, which usually costs around $100 to file. With a corporation, you will need to file articles of incorporation, bylaws, and numerous other forms. You can use sample articles of incorporation to help prepare your articles of organization so your LLC is similar to a corporation instead of a partnership.
When forming LLC corporations you will need to decide if you want to run your LLC as a C corporation or an S corporation. The structure for both is quite similar, but there are some differences that you will need to keep in mind. Choosing the S corporation for tax purposes allows you to benefit from pass through taxation, where as a C Corporation suffers from double taxation. The double taxation is why some people prefer to form an LLC, they can choose to have their LLC taxed like a corporation, but still benefit from the protection that are provided to corporations.
LLC businesses are protected in a way that is similar to the corporate veil. This means that the LLC member’s personal assets are protected, just like shareholder’s assets are protected in corporations. Protecting the personal assets of members offers the members protection from any business debts and liabilities that are incurred by the business. If the personal asset protection wasn’t available then creditors could come after the members’ house or car to help settle any business debts or liabilities. The one thing that you need to remember is that a personal protection that is offered to LLCs and corporations is not iron clad. The protection is considered null and void if any personal guarantee is signed on behalf of the business.
When it comes to forming LLC corporations, one choice you have to make is where you will be forming your corporation. While most people will choose forming LLC corporations in the state that they live in, others choose NJ incorporation because of the benefits it provides. Incorporating in a state like NJ offers you the chance to incorporate your business in a business friendly state. For example, NJ does not have the extra annual tax that other states charge when forming an LLC.
