Whether you’re a Jersey-local or not, New Jersey is a great state to form 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 launch your operations on the Jersey side?
Steps to open an LLC in New Jersey
- Step 1: Choose a business name for your New Jersey LLC
- Step 2: Designate a registered agent
- Step 3: Obtain an Employer Identification Number from the IRS
- Step 4: File the New Jersey LLC articles of organization
- Step 5: Register with the NJ Department of Taxation’s Division of Revenue & Enterprise Services
- Step 6: Prepare an LLC operating agreement
- Step 7: Open a New Jersey business bank account
Step 1: Choose a business name for your New Jersey LLC
LLC formation 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: Designate 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: Obtain an EIN (Employer Identification Number) from the IRS
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.
Step 4: File the New Jersey LLC 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 $75. For 2-hour processing, the fee is $500. For 1-hour processing, the price is $1,000.
After your request 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: Register with the New Jersey Department of Taxation’s Division of Revenue & Enterprise Services (DORES)
Once you have formed the LLC, you must register the LLC with the New Jersey Department of Taxations Division of Revenue & Enterprise Services (“DORES”) within 60 days.
Registration is intended to provide the state of New Jersey with the information it needs to determine your state taxes and employer contributions. Failure to register your business will result in penalties and fees on taxes owed to the State of New Jersey.
To register, you’ll also need your NAICS code. It’s an 8-digit number used to classify your business industry.
After completing your registration, the state will issue your LLC a New Jersey Tax ID and a Certificate of Authorization to Collect Sales Tax (if necessary). The NJ Tax ID is often the same as your EIN, with 3 additional numbers added. This 12-digit number is your identifier for filing state taxes.
The Certificate of Authorization to Collect Sale Tax is only given to you if you are collecting sales tax. It has to be displayed in your place of business.
Step 6: Prepare an LLC 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.
A properly drafted operating agreement will include the incorporation of, at a minimum, the following member issues:
- Member identity
- Member interests
- Member capital contributions
- Allocation of profit and loss among the members’
- Amount and timing of member distributions
- Management responsibilities
- Voting rights
- Procedures for changing the LLC ownership structure
- Financial reporting responsibilities
- LLC dissolution procedures
The cost of drafting an operating agreement can be $0 if you draft your agreement by customizing an available template. It’s allowed. Or upward to $1,000 in legal fees if using a corporate attorney.
Step 7: Open a New Jersey business bank account
To operate your new business successfully, you need a business bank account.
If your company operates in several states, you may want to use a national bank such as Bank of America or Chase. If your business will be confined to New Jersey and you live in the state, opt for a more affordable local institution.
Local banks usually offer more personal services and lower fees than national banks. Fulton Bank of New Jersey, Investors Bank, Lakeland Bank, and New York Community Bank have excellent reputations in New Jersey.
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.
New Jersey LLC taxes, costs, and fees
LLC operating costs in New Jersey vary depending on your type of business. Some are fixed. Others are variable.
Every New Jersey LLC must file an annual report. The filing fee is $75 plus an additional fee of $3 to file online. The annual report is due by the last day of the LLC’s anniversary month.
New Jersey does not have a franchise tax for single-member LLCs. But multi-member LLCs must file a New Jersey partnership tax return and pay a $150 fee per partner up to a maximum of $250,000. If a New Jersey LLC has non-resident partners, it may be responsible for paying tax on behalf of the non-resident partner.
Alternatively, an LLC may elect to pay a Pass-Through Business Alternative Income Tax. This tax is based on the member’s share of distributive proceeds. The members may then claim a tax credit on the amount of tax paid on their behalf by the LLC. Consult your tax adviser regarding any of these situations.
When an LLC sells taxable goods or services, it will be responsible for collecting sales tax from its customers at a rate of 6.25%. Then remit it to the government.
If your LLC will buy goods from other businesses for resale or manufacturing, you may avoid New Jersey sales taxes by obtaining a Reseller Permit.
If the LLC has employees, it will be responsible for unemployment taxes and withholding taxes.
New Jersey business permits and licenses
On a state level, there isn’t a general business license. But if you operate in a regulated industry, you will need a professional license.
License requirements and costs will depend on your business. Consult the New Jersey Licensing & Certification Guide for more details.
To give you some ballparks:
- Real estate license fees range from $100 to $270
- Fees related to a business involving alcohol start at $100 up to $12,500
- A dentist’s license costs $125
- A home repair license costs $110
If you require a professional license you can apply for them through the New Jersey Division of Consumer Affairs website.
Pros and cons of forming an LLC in New Jersey
As Benjamin Franklin once said:
“New Jersey is an immense barrel, filled with good things to eat and open at both ends, with Pennsylvanians grabbing from one end and New Yorkers from the other.”
Certainly, operating a new business owner as an LLC in New Jersey has benefits, but there are downsides.
Below is a quick summary.
New Jersey LLC pros
- Convenient online company formation experience
- Proximity to New York and Pennsylvania
- Lower cost of living than New York
- Lower tax burden than New York
- Highly educated and experienced pool of talent
- Growing local market
New Jersey LLC cons
- One of the highest property taxes in the country
- Higher personal income tax rate than in most states
- Higher business tax rate than in most states
- $150 minimum tax per LLC member
- Withholding tax on non-resident members
- Does not allow series LLCs
- New Jersey’s proximity to New York with lower taxes and a lower cost of living makes it an attractive state to form an LLC.
- LLC formation in New Jersey is somewhat different from other states. You need to complete several tax ID registrations.
- New Jersey imposes a minimum tax of $150 per partner for LLCs treated as partnerships.
- The New Jersey Secretary of State and Department of Revenue websites offer comprehensive guidance but are not user-friendly.
- The fee to get a Certificate of Organization in New Jersey is $175.
- An LLC is required to file an annual report and pay a fee of $75 plus a $3 online filing fee.
- Other licensing and permitting requirements are governed according to the specific business of the LLC.
- A permit may be required to collect and remit certain taxes to the New Jersey Department of Revenue.
New Jersey LLC FAQs
Below are some of the most frequently asked questions (FAQs) about forming an LLC in New Jersey.
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.