How to Incorporate in New Jersey (August 2024 Update)

Incorporating your business in New Jersey can provide several key benefits. The first is limited liability protection. When you form a corporation, your personal assets are protected from business debts and legal judgments against the company. Creditors can seize corporate assets if the business can’t pay its bills, but they generally can’t go after owners’ personal bank accounts, homes, or other possessions.

Forming a corporation also provides potential tax savings in New Jersey. Corporations pay lower tax rates on the first $100,000 of profits compared to pass-through entities like sole proprietorships or partnerships. New Jersey also doesn’t tax dividends issued from profits that have already been taxed at the corporate level. This avoids the double taxation issue that affects shareholders of C corporations in some other states.

Finally, being incorporated often provides more credibility with potential investors and lenders. It shows you’ve taken steps to formalize your business structure and limit personal liability risks. Banks usually require business borrowers to form some type of legal entity before they’ll approve financing.

Overview of Requirements

While incorporating does take a bit more effort upfront compared to other startup options, New Jersey has streamlined the process in recent years. You'll need to complete five key steps:

• Choose and register your corporation’s business name
• Appoint a registered agent to accept legal documents
• File paperwork (articles of incorporation) with the state
• Obtain an Employer Identification Number (EIN) from the IRS
• Set up your ownership structure, corporate bylaws, bank accounts and accounting system

Choosing and Registering a Business Name

The first step to incorporating in New Jersey is making sure the name you want to use isn’t already taken by another business. You can search names and submit an application to reserve a name for up to 120 days through New Jersey's Division of Revenue and Enterprise Services.

Your corporate name must include a business designator at the end, such as Corporation, Incorporated, Company, or a common abbreviation like Corp. or Inc. It also can't be misleading about the type of business you conduct or your location. Once you’ve identified an available business name to your liking, you can proceed to the next steps.

If you ever market your business under a different name than your official corporate name, called an "alternate" or "DBA" name in New Jersey, you'll also need to register that name at the county or state level depending on your corporate structure.

Appointing a Registered Agent

Before submitting your paperwork, you must choose a New Jersey registered agent, which is a person or company that agrees to accept legal documents served to your corporation. Lawsuits against your business and other important legal notices will go through your registered agent.

Using a third-party provider can help maintain your privacy by keeping your home or business address off public records. It also provides assurance someone will be available during business hours to accept any documents so you don't miss important legal notices. You can always change registered agents later on if you need to.

Filing Paperwork with the State

To form your New Jersey corporation, you’ll prepare and submit articles of incorporation to the Division of Revenue and Enterprise Services. This document only needs to contain a few key pieces of information, including your business name, registered agent, incorporators, and business purpose.

You can file articles of incorporation by mail, but online filing through the state portal is recommended because it’s faster and updates in real time. The filing fee is $125 plus a service fee.

When setting up your ownership structure in the articles, authorizing enough shares upfront provides flexibility to add investors or set up employee stock option plans down the road.

Be aware that any documents filed with the state become part of public record. However, you can maintain privacy by listing a registered agent and using their address rather than your own personal residence.

Obtaining an EIN from the IRS

While forming your business structure at the state level provides limited liability and other perks, registering for federal tax purposes creates a permanent identity for your corporation with the IRS.

An Employer Identification Number (EIN) works like a Social Security Number for your business entity. You’ll need it to open business bank accounts, file tax returns and hire employees.

Sole proprietors can use their SSN, but all other structures including corporations must obtain their own EIN. The IRS lets you apply online for free and receive your EIN instantly.

Structuring Your Corporation

Creating corporate bylaws, holding an initial board meeting, and designating roles are all part of the initial housekeeping that turns your legal entity into a functioning business.

Your bylaws act as an operating manual, detailing policies that govern finances, ownership changes, director elections and more. While not required, adopting clear bylaws before you start operating avoids misunderstandings down the road.

At your first organizational meeting, directors are appointed and bylaws and incorporation documents are formally adopted. A corporate bank account should be set up as well to keep your business finances separate from your personal transactions. For more information, take a look at our article on the key benefits of business checking accounts.

Ongoing Compliance

After clearing all the initial legal hurdles to start your corporation, there are still a few reporting requirements to keep it legally compliant. New Jersey corporations have to file an annual report and pay state taxes each year. You may also owe federal income taxes quarterly once your business is up and running.

The $75 annual report is due at the end of your anniversary month each year. It confirms your business is still operating and updates any ownership changes from the prior year. Failing to file the report two years in a row will lead to involuntary dissolution of your corporation.

On the tax side, New Jersey has a unique Corporate Business Tax instead of a corporate income tax. Your total tax bill is based on your allocated net income, with a progressive marginal rate that maxes out at 9% on income over $100,000. S corporations pay a flat $375 minimum tax each year. You also must collect and remit the state sales tax of 6.625% on applicable transactions.

While staying fully compliant does create additional responsibilities, the benefits often outweigh the annual costs for most incorporated small business owners in New Jersey. Connecting with an accountant or attorney that specializes in corporations can also help you stay on track with filings and fully leverage your new corporate structure.

Conclusion

Forming a corporation may seem complicated, but breaking it down into a few key steps makes the process fairly straightforward. Naming and registering your chosen business identity, designating a registered agent, filing your articles of incorporation, obtaining an EIN, and setting up your bylaws and bank account lays the groundwork for operating as a legal entity. Staying current with annual state reporting requirements and tax payments keeps your corporation in good standing year after year.

While legal and tax considerations spur most entrepreneurs to incorporate, limiting personal liability is often the top reason to form a corporation in New Jersey. By taking the time upfront to properly structure and run your business as a separate entity from yourself and other individual owners, you gain the liability protections of the corporate form. That peace of mind allows you to focus on building your business without worrying about personal assets being put at risk for business debts and obligations.