Follow our free guide to form an LLC in New Jersey
- Pros and Cons of Forming an LLC in New Jersey
- Starting Your New Jersey LLC
- Maintaining Your New Jersey LLC
- Additional New Jersey Resources
Check out our informative guide on building an LLC in New Jersey and learn everything you need to know about forming your LLC business.
Pros and Cons of Forming an LLC in New Jersey
No State or Federal Taxes for LLCs
The state of New Jersey does not impose any corporate or state tax on LLCs. The only taxes owed on the LLC’s revenue is the personal income tax paid by the members.
Close proximity to Three Major Metro Areas
New Jersey is located in a prime geographic area and is in relatively close proximity to three major metropolitan areas: New York/Newark/Jersey City, Philadelphia/Camden/Wilmington, and Washington/Arlington/Alexandria. All three zones are among the top metro areas in the nation.
High Gross Domestic Product
New Jersey knows how to make money - despite its small size, the state’s GDP is almost $600 million ($592 million in 2017) In fact, New Jersey had the 8th highest GDP in the nation in 2017, surpassing many states twice its size.
LLC Ownership not Private
The state of New Jersey requires that at least one member/manager be listed in the business registration paperwork. Unlike some states, an organizer is not allowed to sign and submit the Certificate of Formation application in place of the business owners.
High Cost of Living
New Jersey’s soaring cost of living easily puts it at the top of the list for most expensive states in the country. The average home price is well over $500,000 and 2016 saw a hike on gasoline tax of almost 25%. New Jersey residents typically spend almost15% more for common necessities than residents in other states.
High Property Taxes
As expensive as it is to live in New Jersey, high property taxes only add to the financial burden. The average property tax rate is more than double the national rate: 2.40% over 1.20%. The average bill for property taxes in New Jersey is not far from $10,000 — $8,350 in 2015.
Cost of Doing Business
- $125 filing fee/$50 annual report
- $0 state taxes
Starting Your New Jersey LLC
Even though forming an LLC seems like a daunting task, the process is much easier than you might think, especially if you have professional assistance like Swyft FIlings. Here are the steps needed to ensure that your New Jersey LLC comes together correctly:
- Step 1: Name your LLC
- Step 2: Establish Ownership of your LLC
- Step 3: Select a Registered Agent
- Step 4: File the Certificate of Formation (Register Business)
- Step 5: Create your Operating Agreement
- Step 6: Obtain an EIN
Step 1: Name Your New Jersey LLC
Finding a name for your new business is an important first step in forming your [state] LLC. As you narrow down the list of possible company names, there are a few guidelines to keep in mind:
The official name of your business must end with one of the following:
- Limited Liability Company
- Limited Company
- Your business name cannot be intentionally misleading to consumers
- The name of your new LLC must not be similar to another organization’s name/trademark
A few restrictions do exist regarding the name of your LLC, depending on the state where you are starting your business.
A few examples include:
- “Lottery” and “Bank” are ineligible for use
- Terms that represent educations or Veterans’ organizations are restricted
- Terms related to the Armed Forces or civil servants (police, EMT, fire)
LLC business names associated with government and/or financial entities are not always restricted—it depends on the state. Additional paperwork may be required.
In addition to choosing a name for your LLC, creating an online presence is equally important in the current culture. You can easily check domain name availability at a number of online web services sites.
Step 2: Establish Ownership
The owners of an LLC are known either as members or managers, depending on the management structure of your business. The ownership of a member-managed LLC is divided up among the members. With a manager-managed LLC, the manager is the active operator of the business and the members are more like investors who are not involved in running the company.
After you have selected a name for your business, you then need to designate the owners/members of the LLC. Important points to note regarding New York’s rules concerning LLC ownership include:
Required Number of Members
New Jersey LLCs must have at least one member or manager in order to form an LLC.
Member Disclosure Requirements
The state of New Jersey requires that at least one member/manager be listed in the filing paperwork.
LLC members in New Jersey may be of any age.
There are no residency restrictions imposed on LLC members in New Jersey.
Step 3: Find a Registered Agent in New Jersey
All New Jersey LLCs must have a registered agent (also known as an Agent of Service of Process) on file and submit their name and physical New Jersey address (which cannot be a P.O. Box). This agent will be required to be accessible during standard business hours and acts as the state’s point of contact with the company.
What is a registered agent?
A registered agent is a person or business who is authorized to accept official government notices (including the Secretary of State) and service of process notices on behalf of the LLC.
Why do you need a registered agent?
The short answer is that you have to. Whenever you form an LLC in New Jersey, you are required to appoint a registered agent so that the state government has a steady contact person for your business. This person is especially beneficial for companies that do not have a physical address.
Who can be a New Jersey registered agent?
The requirements to be a registered agent are as follows:
- A resident with a physical address in New Jersey
- An LLC or corporation that is licensed to conduct business in New Jersey.
It is also possible for you to be your own registered agent as long as you use a physical address.
Why you may not want to be your own registered agent
The agent’s address is public record, meaning that you compromise your personal information. Additionally, as lawsuit notices are typically delivered to the registered agent, you risk process servers showing up at your home or business during inconvenient (and embarrassing) times.
Tip: Avoid the hassles that come with being your own registered agent and choose Swyft Filings to fill the registered agent needs for small businesses in New Jersey. Find more information here.
Step 4: File the Certificate of Formation/Public Business Filing Form
In order to legally and officially form an LLC in New Jersey, one of the most important steps is to officially register your business with the Secretary of State. This vital document includes the following:
- The name of the LLC
- The location of the business
- The name and location of the registered agent
- The description of the LLC as either member-managed or manager-managed
- The name of at least one member/manager of the LLC
- The statement of purpose
Additional New Jersey Filing Requirements
New Jersey allows some professional service businesses to form LLCs; although usually known as a Professional Limited Liability Company (PLLC), state law does not distinguish between a PLLC and an LLC.
The types of professionals that are generally allowed to form an LLC include accountants, doctors, attorneys, and insurance agents. The ultimate determination can be made by making inquiries to a specific profession’s state regulatory board.
A few points to consider:
- All members of the professional LLC must be licensed in the profession of the business.
- The professional LLC is only allowed to provide services for which the business was formed.
- The members are still subject to whichever licensing boards govern said profession.
Step 5: Create an LLC Operating Agreement
When you form an LLC in New Jersey, it is good practice to create an LLC Operating Agreement to add structure to your business and project a sense of professionalism.
What is an LLC Operating Agreement?
The LLC Operating Agreement is a legal document that defines the rights and responsibilities of each person involved in the business and laying out the details involving how the business will operate.
Why do I need an LLC Operating Agreement?
Because the LLC Operating Agreement defines the roles of the business’s members and provides direction for daily operations, the document ensures stability and structure to the LLC and reduces future disputes.
What goes into an LLC Operating Agreement?
While there is not a set rule of what must be included in your LLC operating Agreement, most documents include the following the information:
- Initial capital contributions of the members
- Who gets to vote, how they vote and what percentage of votes are needed to do certain actions
- Restrictions on transfer of a member’s share or the addition of a new member
- How profits will be distributed
- Designation of members/managers
Tip: Get a customized LLC Operating Agreement for your small business with Swyft Filings. Find more information here.
Step 6: Obtain an EIN
New Jersey requires an EIN (Employer Identification Number) for all LLCs that will have employees, and most banks will require one to open accounts.
What is an EIN?
The EIN (Employer Identification Number), sometimes referred to as a Federal Tax ID, is a nine-digit number assigned to your business by the Internal Revenue Service (IRS) that identifies your business with the government. Many people compare the EIN to a personal social security number, except it is used specifically for business reasons.
What entities need an EIN?
If you are operating any type of entity other than a sole proprietorship, you will likely need an EIN to conduct business. The more common reasons you would need an EIN are:
- To hire employees
- To open a bank account in the U.S.
- To file your company’s taxes
- To pay independent contractors
If you collect revenue of any kind through a corporate entity, you will need an EIN.
Swyft Filings offers EIN services for small businesses in New Jersey. Find more information here.
Maintaining Your New Jersey LLC
The initial phase of setting up your New Jersey LLC is completed, but there are a few more steps to go through that will focus on getting your business ready to actually conduct business. The next few steps include:
- Step 1: Register for the necessary taxes in New Jersey
- Step 2: Apply for the required permits and licenses
- Step 3: File a Certificate of Good Standing
- Step 4: File the Annual Report for your LLC
Step 1: Register for New Jersey State Taxes
New Jersey is one of the few states that do not require LLCs to pay taxes (state/corporate/franchise). Members only have to pay personal income taxes on their earnings:
For any LLC in New Jersey that opts to be taxed as a partnership, each member of the business must pay the state’s Partnership Tax of $150.
If an LLC chooses to be taxed as a C-corp or S-corp, the business is subject to paying a sliding scale corporate tax that starts at 6.5% for businesses making less than $50,000 and tops out at 11.5% for businesses with more than $1 million in revenue:
Step 2: Obtain Business Licenses and Permits
The business licenses and permits required in New Jersey can vary, based a few factors:
- The county/township where your LLC is located
- The type of business you are starting
Tip: If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.
Step 3: File an Annual Report
LLCs formed in New Jersey are required to file an annual report with the Department of State. The purpose of the annual report is to keep your business’s information updated with the state.
Fee: $50/ additional $25 if any changes are being made
Due Date: The last day of the initial month the LLC was formed
Implications of Late Filings: Your LLC will be dissolved after 2 years delinquency
Swyft Filings helps you stay compliant by providing stress-free solutions. File your annual report with us today.
Step 4: Obtain a Standing Certificate
Once the basic steps to forming your LLC in New Jersey have been completed, you are almost ready to go. Many financial institutions and businesses may want a “seal of approval” that your new LLC is fully compliant with the state. In this instance, it is a good idea to get a Standing Certificate (also known as a Certificate of Good Standing) to prove that you are a solid company.
What is a Standing Certificate?
The Standing Certificate is an official notification from the government agency that confirms your entity has been properly filed and is still in compliance.
Why should I obtain a Standing Certificate?
In the course of conducting business, there will be times when you will need to prove that your business is properly filed and fully compliant with the state. Many banks and businesses will request a Standing Certificate as part of the due diligence process (especially during major transactions).
For the most part, any time you need to show your business is properly filed and fully compliant, you will likely need to present a Standing Certificate.
Swyft Filings can create a Standing Certificate for your New Jersey LLC. Click here for more information.