This guide will lead you through the process of starting a Limited Liability Company (LLC) in New Jersey step by step, from choosing a business name to understanding the costs and benefits involved. Whether you're a seasoned business owner or new to starting a business, mastering how to form an LLC is crucial. Remember, beginning an LLC goes beyond paperwork — it's about developing a stable and profitable business.
How to start an LLC in New Jersey in 7 steps
01. Pick your business name
Naming your LLC is the first step in starting a business in New Jersey. This is not only a creative process; it's also a legal one. Your business name must be distinct and neither too similar nor the same as any other name that is on file with the New Jersey Secretary of State. To ensure that your chosen name complies with state laws, make sure it ends in "LLC," "L.L.C.", or "Limited Liability Company".
To make a business name that stands out and passes the legal test, follow these steps:
Check for availability: Use the New Jersey Secretary of State's online database to search for existing business names.
Follow naming guidelines: Avoid restricted words that could confuse your LLC with a government agency (e.g., FBI, Treasury).
Consider your online presence: Search for domain availability if you plan to also focus on creating a website, which can be easily done through platforms like Wix.
Tip: If you're having trouble coming up with a unique name for your business, consider using a business name generator.
02. Choose your registered agent
Every LLC in New Jersey must have a registered agent, an individual or company that agrees to accept legal papers on behalf of your LLC. Your registered agent must be available during regular business hours and have a physical address in New Jersey.
To choose the right registered agent, consider the following factors:
Reliability: Ensure they are dependable and can handle confidential documents.
Availability: They should be consistently available at the listed address during business hours.
Compliance: Verify that they meet all legal requirements set by the state of New Jersey.
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03. Obtain state business permits
Depending on the nature of your business, you may need specific permits or licenses to operate legally in New Jersey. These could range from general business licenses to industry-specific permits.
To obtain the necessary permits in order to register your business, follow these steps:
Identify requirements: Check with local and state agencies to determine what permits you need.
Complete the applications: Fill out all required paperwork accurately and submit them to the appropriate authorities.
Pay any fees: Be prepared to pay any associated fees for obtaining your permits.
Let’s say you want to start a homecare business in the state. First, you’ll need a permit to operate. You will also need to comply with state regulations related to home care services, which may include background checks for employees, training requirements and specific protocols for providing care.
Learn more: How to get a business license
04. File a public records filing for new business entity
The Public Records Filing for New Business Entity is a critical document that officially creates your LLC in New Jersey. You'll file this with the New Jersey Secretary of State, either online or by mail, along with the required filing fee.
The filing process includes these key actions:
Gather your business information: You'll need details like your LLC's name, registered agent information and management structure.
Fill out the online form: This is the specific form used for filing an LLC's Public Records Filing for New Business Entity in New Jersey.
Submit and pay fees: Complete the submission process by paying the $125 filing fee.
05. Draft your LLC operating agreement
Although not legally required in New Jersey, creating an operating agreement is highly recommended. This internal document outlines ownership structures, member roles and operational procedures for your type of business.
Here’s why an operating agreement is important:
Clarifies business rules and guidelines: It sets clear expectations for members regarding operations and conflict resolution.
Protects LLC status: Helps maintain limited liability status by proving that your LLC is a separate business entity.
Prevents misunderstandings: Reduces potential disputes among members by detailing policies and procedures for how the business should be run.
06. Apply for an EIN and pay relevant taxes
An Employer Identification Number (EIN) is like a social security number for your LLC. It’s necessary for hiring employees, opening bank accounts and filing taxes.
Securing an EIN involves:
Applying online or via mail: The IRS provides free EIN registration through their website or via mail submission.
Understanding your business tax obligations: Learn about state-specific taxes that apply to your LLC, such as franchise tax or sales tax. In New Jersey for an LLC owner this includes a 15.3% self-employed tax (12.4% social security, 2.9% Medicare). For more information, visit the New Jersey Office of the State Comptroller's website.
07. Organize annual reports
New Jersey requires LLCs to file annual reports to keep their information up-to-date with the state. These reports include current contact information and details about your business operations over the past year. Filing an annual report ensures that your LLC remains in good standing with the state government.
To ensure you’re compliant with this make sure to:
Know due dates: Your New Jersey Annual Report is required each year on the last day of the month, in the month in which you completed your business formation.
Maintain proper records: Keep accurate records throughout the year to simplify report preparation when due dates approach.
Submit and pay fees: Complete the submission process by paying the $75 filing fee.
How much does it cost to start an LLC in New Jersey
Understanding the costs associated with starting an LLC in New Jersey is crucial for budgeting and financial planning. Here's a breakdown of the expenses you can expect:
Public Records Filing for New Business Entity fee: This is the cost to officially file your Public Records Filing for New Business Entity with the state. This is a one-time cost that is mandatory for all new LLCs. For an LLC it costs $125.
Registered agent fee: If you hire a professional registered agent service, they will charge a fee for their services.
Business permits and licenses: The cost varies depending on the type of business and where it's located. Some industries may require multiple licenses.
Employer Identification Number (EIN): Obtaining an EIN from the IRS is free of charge.
Operating agreement: If you hire a lawyer or use a professional service to draft your operating agreement, there will be associated costs.
Annual report filing fee: New Jersey requires LLCs to file an annual report, which comes with a filing fee.
Additional costs may include:
Legal or financial consulting fees: If you seek professional advice during the formation process, these services will add to your startup costs.
Domain registration and website creation: Costs here include domain registration and potentially hiring a web designer or using a website builder like Wix.
Business insurance: Depending on your industry, you might need various types of insurance to protect your LLC.
Learn more: Cost to start an LLC
Who can start an LLC in New Jersey
To form an LLC in New Jersey, there are specific eligibility criteria that need to be met. It's crucial to understand who can start an LLC in the state before you begin the process.
Age requirement
You must be at least 18 years old to form an LLC in New Jersey.
Residency
There's no requirement for you to be a resident of New Jersey or the United States to start an LLC in the state. However, your LLC must have a physical street address in New Jersey for the registered agent.
Legal status
You don't need to be a U.S. citizen or permanent resident to form an LLC. However, non-residents may have additional IRS requirements for taxation.
Business restrictions
Certain types of businesses may have additional regulations or may not be allowed to form an LLC. For example, banks and insurance companies often have different requirements.
Benefits of starting an LLC in New Jersey
There are several benefits to forming an LLC in New Jersey, which may be quite appealing to business owners. It is a well-liked option for enterprises due to its perks, which include tax benefits and legal safeguards.
Limited liability protection
As the name suggests, an LLC provides its owners with limited liability. This means your personal assets are typically protected if your business faces lawsuits or debts.
Pass-through taxation
LLCs often benefit from pass-through taxation where the business itself is not taxed. Instead, profits and losses are passed through to the individual members' tax returns.
Flexibility in management
Unlike corporations, LLCs have fewer formalities and can be managed by the members or appointed managers, providing flexibility in how the business is run.
Ease of formation and compliance
Compared to other business entities, forming an LLC in New Jersey is relatively straightforward, with fewer formalities and compliance requirements.
Credibility with customers and partners
Having 'LLC' after your business name can enhance your credibility with potential customers, suppliers and financial institutions. You can then choose an .llc domain for your website to reinforce this credibility.
A limited liability company—or LLC—is a type of business entity that offers some of the benefits of a corporation with less formality. One key benefit of an LLC is that it can protect a small business owner’s personal assets—like homes, cars, and personal bank accounts—from lawsuits against the business. Additionally, LLCs offer the flexibility of filing taxes as a sole proprietorship, partnership, or corporation. Also, you won’t need to worry about some of the same formalities as corporations, such as keeping minutes at shareholder meetings. Shylene D’Addario, VP and associate general counsel at LegalZoom
Disadvantages of starting an LLC in New Jersey
When thinking about setting up an LLC in New Jersey, it's crucial to weigh the advantages and disadvantages. Knowing these drawbacks will help you decide if an LLC is the right business structure for you. Here are some challenges you might encounter with an LLC in New Jersey:
Members of an LLC may be subject to self-employment taxes on their share of the profits.
An LLC may not be suitable for businesses that plan to go public or seek investments from venture capitalists as it does not allow for the issuance of stocks.
There are ongoing costs such as annual report filing fees that must be paid to maintain your LLC's good standing.
Why start an LLC over another business entity in New Jersey?
Choosing the right business structure is crucial for entrepreneurs. In New Jersey, forming an LLC is often preferred due to its unique advantages. But it's important to compare it with other types of business structures to understand why an LLC might be the best choice for your situation.
Here's how an LLC stacks up against other business entities:
Sole proprietorship: Unlike a sole proprietorship, an LLC provides personal asset protection, separating your personal liabilities from those of your business.
Partnership: An LLC offers more protection for each member compared to a partnership, where each partner can be personally liable for the debts of the business.
Corporation: While corporations also provide limited liability protection, they’re also subject to double taxation (taxes on both corporate profits and shareholder dividends). An LLC avoids this with pass-through taxation.
LLCs also offer these unique advantages:
Operational flexibility: Corporations are required to have a formal structure with directors and officers, while an LLC can be managed by its members or managers, providing greater operational flexibility.
Fewer record-keeping requirements: An LLC has less stringent requirements for record-keeping and reporting compared to a corporation.
Profit distribution flexibility: Profits in an LLC can be distributed in any manner agreed upon by the members, unlike corporations that distribute profits according to the number and type of shares held.
You've formed your LLC in New Jersey, now what?
Congratulations on forming your LLC in New Jersey! With the paperwork out of the way, it's time to focus on the next steps to ensure your business's success. Here are some important actions to take:
Open a business bank account: Keep your personal and business finances separate by opening a bank account solely for your LLC.
Comply with tax requirements: Stay on top of your federal, state, and local tax obligations. This may include sales tax, payroll tax, and income tax.
Create a marketing plan: Develop a strategy to promote your business. This could involve building a website, leveraging social media or networking in local business communities.
Continue learning: Stay informed about changes in laws that may affect your LLC and seek opportunities for professional development.
Additionally, focus on these areas to manage and grow your LLC:
Understand ongoing compliance requirements: Familiarize yourself with any annual filings or fees required by the state of New Jersey to keep your LLC in good standing.
Develop a strong brand identity: Create a logo with a logo maker, establish a brand voice and build a professional website to present a cohesive image to customers.
Implement a good accounting system: Good financial management is essential for any business. Set up an accounting system that allows you to track expenses, profits and financial growth accurately.
Looking to start an LLC in a different state?
How to start an LLC in New Jersey FAQ
How long does it take to form an LLC in New Jersey?
The time it takes can vary. Online filings may be processed quicker, typically within a few business days, while mailed applications can take a few weeks.