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New Jersey’s diversity, coupled with universities like Princeton and Rutgers, make the state vibrant and in need of many types of goods and services. Located west of Manhattan and east of Philadelphia, New Jersey is also a major transportation hub, and an excellent place tostart a business.
Known as the Garden State, New Jersey features a wide variety of industries, from manufacturing to clean energy to consumer goods to hospitality. Small, independently owned businesses and chain stores alike dot the cities, suburbs, and rural areas. Multinational pharmaceutical companies like Merck and Johnson & Johnson are also headquartered there, bringing people into the state. It has a lot to offer if you’re considering launching a New Jersey LLC.
How to start an LLC in New Jersey
- Choose an idea for your New Jersey LLC
- Name your New Jersey LLC
- Create a business plan
- Get a federal employer identification number (EIN)
- Obtain your New Jersey Certificate of Formation
- Choose a registered agent in New Jersey
- Obtain business licenses and permits
- Understanding New Jersey state tax requirements
- Creating an operating agreement
- Examine NJ business insurance options
- Understand financial considerations
- Market your LLC
What is an LLC?
Limited liability companies (LLC)are one of three main business structures owners generally choose. The two other types ofbusiness structuresbeingsole proprietorshipsorcorporations.
The major benefit of forming a New Jersey LLC is its separation as an entity from the owner or owners (LLCs can be owned by multiple people). In this case, a business owner is not personally held responsible for company debt or liability if the company is sued or faces an unpaid debt. Since business finances are detached from the owner’s personal banking, assets like homes and cars are untouchable.
Is a New Jersey LLC right for you?
Business owners can change the structures of their businesses, so choosing a structure is not a now-or-never proposition. However, forming a suitable business structure from the start can save time and headaches. To assess whether an LLC structure is the right fit for your business, keep in mind these considerations:
- Do your personal assets need protection?Liability protection is an advantage of LLCs. If an LLC business owner gets sued, their personal assets, such as a house or car, cannot be touched.
- How important is a limit on tax liability?LLCs also offer flexibility when it comes to paying business taxes. LLC owners can pay taxes similar to a sole proprietor or corporation, meaning filing personal or corporate tax returns. There are pros and cons to both, based on income and how much money an LLC owner wants to reinvest in the business. LLC owners can also deduct startup costs—such as marketing and travel—from their taxes.
1. Choose an idea for your New Jersey LLC
If you’re already researching how to open a New Jersey LLC, one or more business ideas have already taken shape. However, it’s important to distinguish between passion—making artisanal ice cream for the family or helping friends with their information technology (IT) problems—and a viable business. While passion is necessary to launch a business, so is pragmatism.Developing a businessis challenging. One way to solidify your idea is to write a business plan to work through the hurdles and possible surprises of your business idea to determine if it’s something you’re ready to take on.
2. Name your New Jersey LLC
There are creative and legal aspects to take into consideration whennaming an LLC. On the creative side, choosing a business name is often a fun puzzle to solve. Does the name explain the business? Does it need to? Will it help potential customers find your business? Is it too clever, boring, obscure, or cute?
On the legal side, it’s important to ensure through thebusiness name search portalthat a business in New Jersey doesn’t already have the same or similar name—business names in New Jersey must be unique. When you form a New Jersey LLC, the business name must include “LLC” or “Limited Liability Company,” such as “A Penchant For Peppers, LLC,” for example.
Since an online presence is crucial, make sure the chosen domain name is available. Even if you don't launch the business immediately, buy the domain name as soon as possible. Search for and purchase a domain on a platform likeGoogle Domains—prices vary by platform, domain popularity, and domain extension popularity.
3. Create a business plan
Write abusiness planwhen forming a New Jersey LLC. Your business plan outlines the basics of your business and helps you understand and identify your business needs, such as financing or your desired customer base. During the writing process, you might see your business ideas are based in reality and falling into place, or realize there are gaping holes in the business—and there will be far less tears if those issues are worked out prior to launch.
An LLC business plan doesn’t have to be a tome, it should be concise and easy to read by others, such as potential investors or bank loan officers. There aretemplatesavailable to get you started. And reviewing examples can clarify theelements of a business plan:
- Summary of business.A brief statement describing the LLC.
- Business structure.A section identifying the LLC structure.
- Description.Getting more granular on the specifics of the business: Is it a physical or virtual shop? Will offerings include products, services, or both?
- Market analysis.This section explains why the products or services are needed, and why customers would purchase from your business.
- Sales plan.A plan describing how your business will sell its goods or services, and the marketing strategy.
- Operations plan.A brief outline of the operational aspects of the business, like staffing or fulfillment.
- Financial outlook.A recent financial history, how the launch will be funded, and financial projections.
4. Get a federal employer identification number (EIN)
All LLCs are required to register in New Jersey, and the first step is obtaining a federal employer identification number, or EIN. Used to identify a business, it’s free and can be obtained through theInternal Revenue Service.
5. Obtain your New Jersey Certificate of Formation
The next step is filing the required Certificate of Formation, also called a Certificate of Authorization, to register an LLC. You can file online through theNew Jersey Department of the Treasury. The filing fee when registering your business is $125. LLC business owners have to file the tax/employer registration form (NJ-REG) online atNew Jersey’s Department of the Treasuryas well.
After registration, LLC business owners will receive a unique New Jersey tax ID number, and if applicable, a Certificate of Authorization to Collect Sales Tax.
6. Choose a registered agent in New Jersey
A business entity's public record filing can be conducted by the LLC owner if they have a New Jersey street address. However, if you plan to open an LLC in New Jersey but don’t have a street address in the state, you must appoint a registered agent. This registered agent must have a New Jersey street address and be willing to be the point person for legal matters (their address could potentially be made public). There are also registered agent services, which typically cost about $100 to $200 a year.
7. Obtain business licenses and permits
In New Jersey, most businesses—from restaurants andecommercebusinesses to consultants and onsite inspectors—are regulated. Nearly all enterprises need abusiness license or permit. Depending on the sector and location, a business owner may have to contact various offices to find the correct licensing or permitting authority. TheNew Jersey Business Action Center guideoffers a comprehensive list of professions and departments to contact.
For example, nearly all food-related businesses are directed to contact theirlocal New Jersey Department of Health office for licensing and inspections, while those embarking on a locksmith business can contact theBoard of Examiners of Electrical Contractorsfor a license.
If an LLC wants to contract with New Jersey public entities or from local governments to public schools and universities, or if it needs to apply for state grants or tax credits, a BRC (business registration certificate) is necessary. Applications can be found online at theNew Jersey Division of Revenue.
8. Understanding New Jersey state tax requirements
A New Jersey LLC business owner can choose to be taxed as a sole proprietorship, a partnership if there is more than one business owner, or a corporation. If an LLC owner files as a sole proprietor, taxes are paid through their personal tax returns, usingIRS Form 1040and theProfit or Loss from Businesssection on a Schedule C.
When two or more LLC owners choose to get taxed as partners, the LLC files a 1065 and a K-1 to report each owner’s profits, which is then attached to the owners’ personal tax returns. You may also be required to pay an LLC Partner tax of $150 per LLC owner, depending on income.
If the LLC owners want to get taxed as a corporation, they can file taxes similar to how they would as aC corporS corp. With the exception of startups looking for venture capital, the C corp option is less popular when compared to an S corp because it requires business owners to face double taxation and aNew Jersey corporate tax. New Jersey requires LLC owners filing as an S corp to pay $375 a year and file a CBT-2553.
Additional taxes a New Jersey LLC owner may want to be aware of include:
- The sales tax is 6.625% in New Jersey.
- The New Jersey Division of Taxationprovides a list of taxable goods and services. For example, bottled water is not taxed, however, sweetened water is.
- Businesses collecting state sales tax must register at theNew Jersey Treasury, Division of Revenue and Enterprise Services.
- Hotel room occupancy tax. A 5% lodging tax is added to the 6.625% sales tax totaling 11.625%.
Also, there are a few tax incentives for launching a New Jersey LLC, including theSales and Use Tax Exemption Program, which allows exemptions for taxable transactions in certain circumstances.The Urban Enterprise Zone Programhas created an economic development strategy to stimulate business growth in some of New Jersey’s urban areas; businesses must meet certain criteria to participate.
9. Creating an operating agreement
If your New Jersey LLC will be owned by two or more people, consider creating an operating agreement. While not required, it is strongly suggested to have one. This internal, legal document serves as the framework for how a business operates and its ownership structure. It helps if partners disagree on the company’s direction, and lays out crisis management protocols should disaster strike and the company shuts down. Thisoperating agreement templateis a good starting point, your version should include:
- LLC name and address
- LLC owners’ names
- Registered agent name and address
- Member voting rights
- Management, how the business is run
- Compensation structures
- Company rules, including how profits and losses are handled
An operating agreement stays within the company and does not need to be filed with the state. However, It can be used to help establish LLC status or open business bank accounts.
10. Examine NJ business insurance options
Business owners in New Jersey will find theirinsurance policyneeds vary depending on their businesses. For example, an LLC operating in a physical space might need fire insurance, and other businesses using cars need several types of auto insurance. Some other types of insurance coverage for LLCs in New Jersey are:
- Liability insurance.All businesses should have liability insurance. This coverage helps protect a business against lawsuits. Generally, a small business might pay $300 to $5,000 a year for liability insurance. Policies can be purchased through private insurance brokers or agencies like Progressive or Allstate.
- Workers’ compensation insurance.When a business owner has employees, the only insurance that’s required by New Jersey is workers’ compensation.
- Employer liability.If an employee sues their employer for a work-related injury or illness. Also required if a business has employees.
- Health insurance.This is optional insurance coverage for businesses in the state.
- Auto insurance.If the business requires driving.
11. Understand financial considerations
在一个理想世界中,所有的企业主都enormous savings to use when they start a business that turns a profit from the start. But that is a rare occurrence. Most business owners need capital in the early stages of the business and before launch.
There are multiple ways to get this needed capital, including:
- Applying for a loan through a bank or CDFI (community development financial institution)
- Through availableNew Jersey grants, crowdfunding, and money raised through friends and family
- Other funding resources that offer quickaccess to capital
Launching a business can be a stressful time. To help prepare, LLC owners can calculate the dollar amount needed to stay afloat—taking rent, insurance payments, utilities, and possibly wages—into consideration, then, budget accordingly.
12. Market your LLC
Marketing is often an enjoyable aspect of business ownership, as it combines creative messaging with a dash of sociology and group psychology. What makes your business appealing to customers over other businesses? How do you want customers to feel when they enter your retail space, whether physical or virtual?
Acomprehensive marketing planrequires several key components:
- Consumer base.Identify potential customers
- Market research.Focus on the target audience and how to reach them
- Market strategy.Create amarketing strategywith a visualbrand identity, including a logo, found on all collateral; use social media campaigns, advertising, strategic partnerships, and events to reach customers
- Retention.Attentive customer service keeps customers returning
Starting an LLC in New Jersey FAQ
How much does it cost to start and maintain a New Jersey LLC?
It costs $125 to file online to register an LLC with theNew Jersey Treasury’s Division of Revenue and Enterprise Services, and an annual renewal cost of $75.
Do you need a registered agent for your New Jersey LLC?
Yes. A registered agent is someone with a New Jersey street address, and could be the LLC’s owner, the owner’s friend or relative, or a registered agent service in New Jersey.
How do state taxes work for a New Jersey LLC?
An LLC can be taxed as a sole proprietorship, partnership, or corporation.