Setting up a New Jersey LLC is a way to legally structure your business. It provides the benefits of limited liability, so your personal assets remain safe in case the business has problems. This quick guide on how to start an LLC in New Jersey will provide an overview of the steps involved.
An NJ LLC offers several benefits, including liability protection, flexibility for business, and convenient taxation. You can use an LLC to run a business, but you can also use it to hold assets like vehicles, real estate, etc.
So let’s get into the overview of NJ LLC formation.
1. Choosing A Name For Your New Jersey LLC
LLCs in the state are registered with the New Jersey Division of Revenue & Enterprise Services. New Jersey requires that the name of an LLC be unique and distinguishable upon records. This means that the LLC name you choose shouldn’t be the same or similar to a previously registered entity.
There are two online tools available to help you with deciding if a name is available.
The first search returns the names of entities related to the name you search. The second option is more “intelligent” and returns the possible availability of the name. Generally, it’s better to use both options for best results. It should be remembered that these searches are not necessarily adequate, so additional diligence could be necessary.
Proper Designators For NJ LLC Names
Any LLC in New Jersey must end its name with a proper designator. Usually, these are legally accepted variations of “limited liability company”. The designators and naming of LLCs is governed by Section 42:2C-8 of NJ law. Accepted designators include:
- Limited Liability Company
- Ltd. Liability Company
- Ltd. Liability Co.
- Limited Liability Co.
As we see, Limited can be abbreviated as Ltd. and Company can be abbreviated as Co. Or, you may just use initials like LLC or L.L.C.
2. Appoint A Registered Agent For Your NJ LLC
A registered agent is a person or company that receives the ‘service of process’ on behalf of your LLC. This includes legal documents like lawsuits, summons, subpoenas, etc. The agent will also receive notices and other information from the Division of Revenue.
It is mandatory to maintain a registered agent in the state for your LLC. The registered agent must have a street address in New Jersey where mail can be delivered. PO Boxes are not acceptable.
You or your friends and family members can be registered agents for your NJ LLC. That’s assuming, of course, that you fulfill the address requirements.
Another possibility is for an entity or company to work as the registered agent. If you have another business, it can function as the registered agent. However, an LLC cannot be its own registered agent.
A very common practice is to hire a commercial registered agent. The advantage here is that it keeps your address private, since the address of the registered agent is added to public records. Also, since the commercial registered agent is available on all business days, you don’t have to worry about missing or delayed communication.
3. NJ LLC Formation – Public Records Filing And Registration
New Jersey does things slightly differently than other states when it comes to creating an LLC. While most states require the approval of the ‘Articles of Organization’, an NJ LLC filing requires formation and registration.
Certificate Of Formation For New Jersey LLC
To form a New Jersey LLC, you’ll need a Public Records Filing for New Business Entity. You can complete this filing online. It costs $125 to form an LLC in NJ, and you’ll be required to pay it with the Public Records Filing.
The online method is the best way to go about this. It’s convenient and way faster. You can complete the payment with most credit/debit cards. Paying by credit card may attract an additional fee of $3.50.
Once you have the Certificate, it’s important to get a Federal Tax ID (EIN), which is explained in a later section. You’ll need this information to register your LLC. It’s only after the registration is approved that your LLC can do business in the state.
Registering Your LLC In NJ
All LLCs in NJ must register with the Department of Revenue. This registration can be done online and requires no filing fee. You must register the LLC within 60 days of the approval of the Public Records Filing.
Once your LLC has completed its formation and registration, you’ll receive:
- A stamped and approved Certificate of Formation
- A Business Registration Certificate
- Sales Tax Certificate of Authority (if applicable)
4. Getting A Federal Tax ID (EIN)
Having an EIN is required for registering your LLC in New Jersey. Getting an EIN is easy and free. All you need to do is to file a form with the IRS.
You can request the EIN by filing a form online. This method is quick and rather easy to accomplish.
In case you can’t file online, you can use Form SS-4 to get an EIN. This might be necessary for individuals who don’t have an SSN, or in cases where the ownership of the LLC is held by another entity/company.
Once completed, Form SS-4 can be filed via mail or fax. In this scenario, using fax is quicker than depending on mail.
Whatever mode you choose, do remember that you’re on the clock as the EIN is necessary for registering the LLC.
Apart from obvious tax implications, the EIN is also useful in various facets of running a business. For example, it’s important for opening a bank account or getting credit cards for your business. Vendors may also need your EIN to work with you.
5. Your NJ LLC And Its Operating Agreement
Having an Operating Agreement is important to smoothly run your LLC. This is a document that elaborates on various aspects of your business. The Operating Agreement can be a detailed contract amongst LLC members to spell out various details.
The operating agreement may include details on how much of the LLC is owned by each member. Another aspect might be the distribution of profits/losses amongst members. Approach to taxation, hiring policies, conflict resolution mechanisms, and more can be a part of the agreement.
While it’s especially important for multi-member LLCs, the Operating Agreement is useful for single-member LLCs as well.
This is an internal document of your LLC and doesn’t need to be filed with any government agency. However, having this agreement shows that your LLC is functioning as it should, and is properly managed. Such details can be very useful if your business ever finds itself in a court of law.
6. Filing Annual Reports For Your New Jersey LLC
Every New Jersey Limited Liability Corporation must file an annual report with the state. The reports are first due a year after the LLC was formed. Additionally, the report must be filed before the last day of the LLC’s birth month.
As an example, an LLC formed on March 4, 2020, must file its Annual Report by March 31, 2021. For each subsequent year, the report has to be filed before March 31.
You can file the annual reports online. The filing fee is $75. Once the filing is complete, the filed copy is available for download from the confirmation page.
7. Licenses And Permits For Your Business
New Jersey doesn’t have a generic state-level business license. Instead, you’ll have to see what business licenses and permits are relevant to you. These can depend on the chosen industry of your LLC.
Additionally, local licenses and permits can be applicable, depending on the county/municipality where your business is located.
8. Taxation For NJ LLCs
Taxation is a very important aspect for any business to consider. Often, you’ll have to consider three levels of taxation.
- County/Municipal Body
This includes things like sales tax and property tax at the state and local level, respectively. Additionally, some businesses may attract specific taxes or duties depending on their industry.
For federal taxation, an LLC is usually a pass through entity. This means that your profits/losses will be filed with the IRS as part of your personal returns.
However, this can vary depending on the structuring of your LLC and how you choose to pay taxes. For example, you can have the LLC’s federal taxes paid as a C-corp or S-corp. In this case, you’ll also have to consider corp taxes levied by the state.
In the case of multi-member LLCs, you’ll have to consider the LLC Partner Tax as well. This is $150 per LLC member, for companies with two or more members.
Overall, taxation can be complex. If you feel overwhelmed, it’s always prudent to seek professional assistance, rather than trying to get things done without a full understanding.