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Opening a limited liability company is one of the greatest decisions you can take for your business. This is because you can finally shield yourself from the liabilities that accrue from doing business and limit such liabilities to your business.
However, different states have different steps and procedures for opening an LLC and if you are looking to enjoy the benefits and bonuses for opening an LLC in NJ, the first task is to be acquainted with how to open an LLC in New Jersey.
Keep reading to learn how to start LLC in NJ as well as the pros and cons.
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Pros and Cons of starting LLC in New Jersey
Running an LLC has its advantages as well as some disadvantages. Understanding the benefits of opening LLC will most definitely justify that decision to start the business. Below are some of the advantages of starting a limited liability company:
Pros of starting LLC in NJ
Protection from personal liability
Starting an LLC shields you from being liable for the risks in your business. Your personal belongings such as your houses, cars and other properties would not be open for collateral or seizure by creditors. This protection remains for as long as your business runs as a limited liability.
Ensures flexible management
Starting LLC enables a shared management. This means that the day to day management and decision making of the business rests on the entire members as opposed to one person in a sole proprietorship. Members of the LLC can also decide to hire experienced or professional hands to run the business, if you all agree to do so.
Ease of tax filing
LLC is tax-proof at the company level. This means that it protects your profit from being taxed at the company level, instead you are taxed on the profit accruing to you as a member. This allows for an easy tax filing as opposed to your taxes being filed at the corporate level. It also lowers the burden on your tax
Ease of start-up and running of business
Starting LLC is relatively easier and cheaper. First, the burden of the startup capital is shared amongst members, secondly, the registration process is easier and costs less. New Jersey LLC fees requirements are as low as $130. It takes an average of 3 weeks to complete your formation filing, and an expedited filing time can even happen in one business day.
Enjoyment of Grow NJ
By starting an LLC in New Jersey, you stand to enjoy a special assistance program by the state, called Grow New Jersey assisted program. Grow NJ is a special program targeted at encouraging and promoting new businesses. Ways you can profit from Grow NJ include tax credits and other financial supports which are reeled out to ensure job retention. You can get as much as $500 to $5,000 tax credit and bonuses can range between 250 to 3,000 dollars per year.
Survival of member exit
Unlike in some states where LLCs do not survive a member’s exit from the business, one of the advantages of starting an LLC in New Jersey is that your business has an independent life, especially when it is registered on S Corporation. Not even the demise or incapacitation of a stakeholder or one of the members can affect the business.
Offer of Sales and Use Taxation assistant to llc
The Sales and Use Taxation Exemption is targeted at LLC which specialize in buying wares for the establishment of new businesses and renovations. You will be able to enjoy this exemption if you are into purchases of materials for new construction or renovation.
Enjoyment of Premier Lenders Program
By starting an LLC in New Jersey, you stand a chance of a low cost start-up financial assistance up to the tune of 1 million to 1.5 million dollar loans whose guarantees are on fixed assets.
Enjoyment of Garden State Growth Zone Business Lease Incentives
There are places in New Jersey such as Atlantic City, Camden, Passaic, Peterson and Trenton, where new and established businesses profit from reimbursements on the percentage annual lease payments called the Garden State Growth Zone Business Lease Incentives. You can establish your LLC business there and put in for these benefits.
Cons of starting LLC in NJ
Starting your LLC business can come with some drawbacks which you need to consider before opting for your LLC business formation and registration.
Piercing the corporate veil
There are limits to limited liability businesses. These limitations usually occur when there is no clear separation of accounts between the business and your personal transactions, or when the management of the business is done fraudulently. In this instance, a judge can rule that the liability of your LLC is not limited to your business at the corporate level but extends even to your private properties.
Incurring of self -taxation
Unless the members of LLC file otherwise, taxation is not considered on a corporate level in LLC business. In essence, the Internal Revenue Service usually considers each member of the LLC as self-employed and pushes taxes for Medicare, and other social security to the members.
Consequences of member’s exit
The exit of a member from LLC can have far reaching implications on the business. It may lead to business termination and renegotiation of the terms of LLC by the remaining members.
7 Steps on How to Start LLC in New Jersey
There are many options out there on how you can start your LLC, but in this article, I shall be discussing a 7 steps guide on how to open an LLC in New Jersey.
- Begin by choosing a unique business name
Choosing a business name is the first requirement to register your LLC in NJ.
one of the requirements for starting an LLC in New Jersey is that you will have a distinct business name which no other registered business is using.
There are also some naming rules which you have to follow in order to stay within both general LLC naming requirements and NJ specific naming rules on how to open LLC.
Some of the general LLC naming rules include:
- Ensure the chosen name is unique and not used by someone else. LLCs are handled by the state secretary’s office, so you can check to be sure that you aren’t taking a reserved name or a name already in use.
- Ensure that it is not too close or similar to another LLC business name
- Ensure that the chosen name has LLC attached at the end of it
- Ensure that you do not choose names suggestive of affiliations with federal agencies such as FBI, CIA, FBI, etc.
- Ensure that you choose a legal compliant name
Additional considerations
Remember:
You can search your chosen LLC name on New Jersey
You can reserve a name:
NJ LLC laws allow you to reserve a name while waiting to get set for your registration. Business name reservation in NJ for up to 120 days at the costs of $50. You can also change your business name at the cost of $75.
- Secure an official business address for your llc
The New Jersey Division of Revenue requires that you own an official address for your LLC businesses.
This doesn’t have to be a PO Box address. If you run your business from your home but wouldn’t want your private home to reflect or be used publicly as your business address, you can use a mailbox instead.
Mailboxes allow you as a business owner to use virtual addresses for your home-based businesses. This can keep you until you are able to secure a place for your business. You can use your private home for an official address if you do not have any problem with it.
- Secure a Registered Agent for your LLC businesses
New Jersey Division of Revenue requires you as an LLC business owner to have a registered agent who takes care of filing and receiving reports of service and process with the Division of Revenue office.
While you can handle this position, you can also nominate someone else to manage or fill the position for you. NJ LLC rules require that your registered agent should:
- Be more than 18 years of age
- Reside within NJ with a verifiable home address.
- Be able to provide necessary agent services
- Secure a registration certificate with New Jersey Division of Revenue
Starting an LLC in NJ requires you to have a registered Certificate of Formation or Article of Organisations. The New Jersey Department of Revenue and Treasury provides and guides you through the LLC registration process.
Information or details about your business to be found on your registration certificate include:
- Your business name
- Your business address
- Your registered agents’ details
- Your business aim or purpose
- Constitution of regulations of the internal affairs of the company
- Details of members and company managers.
- Date of termination of LLC if not perpetual
- The management of the LLC
Your certificate of formation can be filed online or by paperwork. An annual report is required to be filed after you must have filed your first certificate of formation with the Division of Revenue of NJ.
- Secure a registration certificate from NJ
NJ Division of Revenue requires every LLC business to register and capture its details which will be used for the purpose of taxation by the state. The NJ-registration enables the state of New Jersey to profile your LLC business and assign you a unique taxation number. You have a total of 60 days to apply for your New Jersey Registration from the day you secure your certificate of formation. This comes at no cost.
- Secure your Employer Identification Number
The New Jersey IRS Department guides you on how to obtain the Employer Identification Number which serves as a means of identifying your business as well as your workers. The Employer Identification Number plays three important roles in your LLC business.
- First is that it serves as a means of documentation for your employees’ payment.
- Secondly, you need the EIN as a requirement for opening bank accounts for your LLC business.
- You also need the EIN for filing tax payment. You can obtain your Employee Identification Number from the Internal Revenue Service.
- Set up your LLC business operating agreement
The Operating Agreement describes how your company is constituted and how you intend to run your business daily operations, including decision making. Understanding what is business Operating Agreement is key to succeeding in your business operations.
Setting up your business operating agreement can be rigorous, but with a great business Operating Agreement Template, it can come very easy for you, and you can set your business rolling. Once the process is completed, other key decisions such as setting up and choosing the best business bank account for your LCC.
Cost To Set Up an LLC in New Jersey
Every state takes some charges for setting up businesses. The fees however differ according to each state. Setting up a limited liability company in New Jersey comes at a very minimal cost of $130. Reserving a business name is charged at $50.
FAQs On Starting LLC in NJ
Conclusion
Starting an LLC in New Jersey can be one of the best decisions that you can take for your business life. Starting LLC shifts and limits your business liabilities from your personal life and properties to the business itself. Starting LLC in New Jersey also enables you to access several business benefits such as reduced taxation, exempted taxation, loans and other benefits.
Although there are many options out there on how you can start your llc, we have discussed seven of them in this article. These seven steps include choosing a unique business name, providing an official business address, assigning a registered agent, filing a certificate of formation with New Jersey Division of Revenue, filing your NJ Reg, getting an Employee Identification Number and creating an Operating Agreement.
We can equally assist you at any point you find it difficult starting your LLC in New Jersey.
