Whether you’re a Jersey-local or not, New Jersey is a great state to start a limited liability company (LLC).
New Jersey’s proximity to New York offers big city access without the exorbitantly high cost of living. It also offers access to a well-educated and experienced talent pool to compete with the boys downtown.
Moreover, with more people relocating across the border, many NJ cities are getting more populous and gentrified. Starting a small business to cater to the local crowd has become more attractive.
Ready to start your LLC in New Jersey? Let's go.
Step 1: Name your LLC
LLC formation in NJ begins with name selection.
Business naming can be a fun and creative task. But you must also mind the legal requirements. Generally, the name of your LLC must be distinguishable from other business names already registered in New Jersey.
Also, it must include one of the abbreviations — “L.L.C.,” “LLC,” “Ltd. Liability Co.”, “Limited Liability Co.”, “Ltd. Liability Company,” or “Limited Liability Company.” So that people know that they are doing business with an LLC.
Do not include words in the name that would suggest an affiliation with a government agency (e.g., “FBI,” “Treasury,” “IRS,” etc.). Usage of other words is restricted by the state and requires special permission to use. Some names are prohibited.
You can check if your business name meets all the marks and is available for registration via Business Name Search — a name search utility on the NJ Secretary of State's website. You can also use the Business Name Availability tool.
You can choose to reserve your LLC name before filing the required paperwork for up to 120 days. Do so, complete and file an Application For Reservation of Name. The state fee is $50.
If you want to do business using a different name than the legal name of your LLC, that is possible.
For example, you may need to do this if your LLC was formed in a different state and is already being used by another business in New Jersey. In New Jersey, this alternative name is called a “doing business as” (DBA) name. Other states call it a “trade name” or “fictitious name.” You can register a DBA in New Jersey by filing a Registration of Alternate Name. The fee is $50. You can file the form online, by mail, or in person.
Step 2: Select a registered agent
Similar to other states, New Jersey requires every new LLC to designate a registered agent.
A registered agent is a person or organization appointed by the LLC to receive important documents on its behalf, such as a lawsuit, service of process, tax notices, or correspondence from the New Jersey Secretary of State. The registered agent must have a physical address in New Jersey, not a P.O. box.
You may serve as your own registered agent for free. However, most businesses use a third party as the designated agent for reasons of privacy and convenience.
Generally, companies don’t want a process server showing up at their offices. Also, your agent must be available during normal business hours to receive mail and papers. Not all businesses can be available during those times. Commercial registered agent services providers in New Jersey charge an annual fee of $50-$300.
Step 3: Draft and submit the Certificate of Formation
To legally form your LLC, you must submit a “Public Records Filing for New Business Entity” to the New Jersey Division of Revenue.
Corporations and limited partnerships use this form too. So if you’re incorporating an LLC, there are some fields you can skip.
You can complete and submit this form online, by mail, or fax. Online filing is done through New Jersey’s Online Business Formation portal.
You will need to provide the following information:
- The LLC name
- Name and address of each LLC organizer
- Street address of the New Jersey registered office
- Street address of the principal place of business
- Name and address of the registered agent
- LLC duration (the default is perpetual unless a different time is stated)
The filing fee is $125. The processing time if you file online is 1-2 days. If you file by mail or fax, without expediting, the processing time can be 2-3 weeks.
If you file by fax or in person, the processing time can be expedited by paying additional fees. For same-day processing, the cost is $100.
Step 4: Get a certificate of LLC registration from the state
After your request to form an LLC is approved, you’ll receive a “Certificate of Formation” (Certificate of Authority), which will display your Entity ID.
An Entity ID is a 10-digit number used in New Jersey to identify your business records. Your records are public and kept separate from your confidential tax records.
Step 5: Create an Operating Agreement
Like the by-laws of a corporation, an operating agreement governs the relations among the LLC members and between the members and the LLC. It’s an internal, binding contract between members signed and dated upon forming the LLC.
An operating agreement also establishes:
- The rights and duties of the LLC manager(s) under New Jersey law.
- The activities of the LLC and how those activities are to be conducted.
New Jersey law will come into effect where the operating agreement doesn’t address a particular issue. Even where an operating agreement does address an issue, New Jersey law may override the operating agreement in certain circumstances.
The LLC operating agreement can be written, oral, or implied. You are not required to file it with New Jersey authorities. When in writing, a copy of the operating agreement should be given to all members of the LLC and kept with the LLC books and records.
Although not required by New Jersey law, multi-member LLCs should strongly consider making this document. A written operating agreement can provide greater liability protection for the LLC and its members than the New Jersey LLC statutes.
Further, it allows new investors to see how the LLC will be managed. Also, a written operating agreement helps prevent conflicts between members. In addition, a formal operating agreement may facilitate the financing of the LLC.
Step 6: Get an Employer Identification Number (EIN)
Before you form your LLC in New Jersey, you should obtain an employer identification number (EIN) from the Internal Revenue Service.
An EIN is the business equivalent of a social security number. It is necessary to hire employees and file business and employment tax returns. You also need to provide this number when filing company formation documents in NJ.
If you are a single-member LLC treated as a sole proprietorship for federal tax purposes and don’t have employees, you are not obliged to register an EIN.
The application process is straightforward, and you may obtain an EIN online. There is no fee.
Costs to set up an LLC in New Jersey
Business owners can anticipate spending just over $100 to meet the minimum requirements for starting an LLC in New Jersey. This encompasses formation fees and could potentially escalate to several hundred dollars more if you necessitate a trademark, name reservation, or opt for expedited services. Registered agent fees vary, yet they could contribute a few hundred dollars to your overall LLC formation expenses. In case you have inquiries concerning LLC formation, there will also be costs associated with consulting an attorney or CPA. Additionally, it's important to note the obligatory annual filing fee of $75, which applies to all LLCs.
Furthermore, if your operations fall within an industry mandating licenses or permits, there will be supplementary costs. Depending on your LLC's tax filing status, you might also be subject to a minimum required tax payment each year.
Open a bank account
To operate your new business successfully, you need a business bank account. To open a business account, you will usually need to provide your Certificate of Formation, a company resolution authorizing the opening of a bank account, and your EIN from the IRS.
If you are a single-member LLC and report your income on your Federal 1040, you aren’t legally required to obtain an EIN. However, the bank may require it anyway. Fees will vary depending on the amount of activity in your account and the deposit cash. Overall, plan to pay $0 to $35 monthly.
Permits and licenses
Some businesses will need additional permits or licenses. The specific permits required vary based on factors such as the industry and location of your business. To determine the permits and licenses relevant to your LLC, you can use the New Jersey Business Action Center's Permitting Wizard tool or contact the city and county where you’ll operate your LLC.
Annual report/tax filing
All LLCs in New Jersey must file an annual report with the New Jersey Division of Revenue and Enterprise Services. This report confirms or updates the company's business information on record with the state and costs $75. Annual reports can be filed online through the New Jersey Division of Revenue and Enterprise Services website.
This material is provided for informational purposes only. The provision of this material does not create an attorney-client relationship between Paul Donovan and/or Donovan Legal PLLC and the reader, and does not constitute legal advice. Legal advice must be tailored to the specific circumstances of each case, and the contents of this article are not a substitute for legal counsel. Do not take action in reliance on the contents of this material without seeking the advice of counsel.
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