Form An LLC
Step 1) Verify & Secure Your Brand Name
First off, in order to launch a successful New Jersey LLC, you need to give it the right name. Your business name needs to be catchy for branding purposes and legitimate for legal purposes. We go into depth on this topic in our LLC naming guide, but we’ll go over the legal basics below.
Legally, your business name must:
- Contain the words limited liability company, limited company, or the abbreviation LLC or L.L.C.
- Not contain the words bank, banker, Olympic, realtor, or dba.
- Be distinguishable from any other entity or trade name registered in New Jersey.
If you’re having trouble coming up with a name that captures your brand, don’t let that stop you from forming your LLC. For now, you can focus on the legal requirements and consider applying for an alternate name after you’ve nailed down your branding.
What To Do:
Once you’ve decided what you’d like to call your LLC in New Jersey, do a business name search to find out whether or not it’s in the cards. If your business name is available, you’ll be able to lock it down when you file your Business Registration Application.
Quick Note: Before you commit 100% to a name, you should see if there’s a decent URL available. Use GoDaddy to search for your options. If there’s a quality domain name for purchase, we advise buying it right away because even if launching a business website isn’t on your radar right now, it’s going to be soon.
Step 2) Appoint A Registered Agent
When you file your Certificate of Formation, you will be asked to appoint a New Jersey registered agent.
Your registered agent will be responsible for receiving important legal documents like tax forms and service of process notices on behalf of your LLC. Your registered agent can be an individual resident of the state or a company that’s legally authorized to represent businesses in New Jersey.
New Jersey does give you the option to act as your own registered agent, but many business owners choose to appoint a professional instead. Here are a few things to think about before you decide to act as your own:
- You’ll have to maintain normal (9 am - 5 pm) business hours at the address you provide.
- If you run your business from home, you’ll be required to make your personal address public.
- You must keep up on important notices, dates, and deadlines.
- You could be served in front of your family or coworkers.
What To Do:
If you’re considering acting as your own registered agent, do some research, starting with our registered agent guide. If you decide you’re up for the task, go ahead and list your own name and address on your Certificate of Organization.
If you’re leaning toward hiring a professional, we recommend doing so through an online LLC formation service. Many of these companies (like ZenBusiness) offer up to one year of registered agent service free when you form your LLC with them.
Step 3) File the Certificate of Formation
Once you’re ready to make your brand official in New Jersey, file the Certificate of Formation portion of the Business Registration Application with the Division of Revenue & Enterprise Services using their Online Services page.
You can also file by mail by completing and mailing in pages 23 and 24 (Public Records Filing) of the Business Revenue Forms Packet.
You can handle this step on your own, but we still recommend considering the help of an LLC formation service. Why? Not only will they take the reins and make sure you file everything properly, but they’ll also provide other necessary products and services at very competitive prices.
One great option is Northwest. In addition to great service, they give you a free year of registered agent service when you sign up.
Step 4) Register for New Jersey Tax Identification
Within 60 days of forming, LLCs must register with the New Jersey Division of Revenue and Enterprise Services for business entity and tax filings. Doing so will make sure your business receives a New Jersey tax identification number, which the state uses to assign all important returns and notices.
Typically, New Jersey will make your tax identification number the same as your EIN, which we cover in the next section.
Step 5) Draft An Operating Agreement
Creating an LLC operating agreement is the only way for you and your members to fully define your roles and lock down your LLC’s management and ownership structure. Having this document in place will also give you all something to return to if a dispute or lawsuit arises.
Your operating agreement should outline the following:
- each member’s responsibilities
- how new members will be admitted
- how existing members may transfer or terminate their membership
- how profits and dividends are to be distributed
From there, you can add as many provisions as you want, provided they are not in conflict with New Jersey business law. To access a free operating agreement and learn more about how this document works in New Jersey, click here.
Step 6) Get An EIN
The Employer Identification Number (EIN), or Federal Tax Identification Number, is essentially a social security number for your company. State and federal agencies use this number to track your business activity.
Your EIN will come in handy when it’s time to:
- Open a business bank account
- File Federal and State taxes
- Hire employees
We think the best way to get an EIN is by using the free online application on the IRS website. We prefer this method because it's the most efficient, but you can apply by phone, fax, or mail. You can read through our guide to find out how.
Maintain Your LLC's Personal Asset Protection
Using dedicated business banking and credit accounts is essential for personal asset protection.
Now that you’ve made it through the formation process for your LLC, you’ll need to take steps to protect your personal assets and establish your business as an independent entity.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.
You can go a long way in protecting your assets with these three steps:
1. Open a business bank account.
A business bank account separates your personal assets from your company's assets, which is necessary for personal asset protection. A designated business bank account also makes accounting and tax filing easier.
Get $200 when you open a business checking account with Chase.
2. Get a business credit card.
A business credit card helps you separate personal and business expenses. A business credit card will also build your company's credit history, which can be useful to raise capital later on.
3. Designate an authorized representative.
Make sure all documents are signed by a representative of your LLC and not by you (or other LLC members) directly. This will help separate you from liability incurred by the LLC.
Reduce the Liability of Your LLC
Business insurance helps you manage risk and focus on growing your business. Carrying the right coverage protects your LLC from liability and keeps you safe in the event of a loss.
The most common types of business insurance are:
- General Liability Insurance: A broad insurance policy that protects your business from lawsuits. Most small businesses get general liability insurance.
- Professional Liability Insurance: A business insurance for professional service providers (consultants, accountants, etc.) that covers claims of malpractice and other business errors.
There are free services available that quickly assess your business’s insurance needs. These services suggest customized policies with various insurance carriers so that you can choose the best value. One such reliable service is CoverWallet.
You can reduce your LLC’s liability by being fully compliant with employment laws such as:
- Verifying new employees are allowed to work in the US.
- Reporting employees as "new hires" to the state.
- Withholding employee taxes.
- Printing compliance posters and placing them in visible areas of your workspace.
If you plan to hire employees, you might also be required to invest in Workers' Compensation Insurance. This type of policy provides coverage for employee job-related illnesses, injuries, or loss of life.
Find out more information at the Official Site of the State of New Jersey.
As a new LLC, you will need to stay compliant with permits, licenses, taxes, and state filings. This is serious business; failure to comply can lead to fines, tax penalties, and dissolution (the end) of your LLC.
Business Licenses and Permits
To operate your LLC, you must comply with federal, state, and local government regulations. The details of business licenses and permits vary from state to state, so make sure you research carefully and plan accordingly.
Find out how to obtain necessary licenses and permits for your business or have a professional business licensing service do it for you:
Federal: Use the U.S. Small Business Administration (SBA) guide.
State: Use New Jersey's Business Portal website.
Local: Contact your local county clerk and ask about local licenses and permits.
If you are selling a physical product, you’ll typically need to register for a seller's permit through the New Jersey Division of Taxation website.
This certificate allows a business to collect sales tax on taxable sales.
Sales tax, also called "Sales and Use Tax," is a tax levied by states, counties, and municipalities on business transactions involving the exchange of certain taxable goods or services.
Here’s a sales tax guide to find out more.
If you have employees in New Jersey, you will need to register for Unemployment Insurance Tax through the New Jersey Department of Labor and Workforce Development. You will also need to sign up for Employee Withholding Tax through the New Jersey Treasury Department’s Division of Revenue.
New Jersey requires all LLCs to file an annual report. If you miss state filings like the annual report, you could face fines or even automatic dissolution. A quality registered agent service can help protect your assets by keeping track of filing requirements for you.
Secretary of State Division of Revenue and Enterprise Services
PO Box 252
Trenton, NJ 08625-0252
Due Date: Due by the end of the month in which the LLC was formed.
Late Filings: New Jersey does not charge late fees if you miss your filing deadline, but the state will revoke your LLC after failure to file for two consecutive years.
Reduce Administrative Burden
There will be many demands on your time once you start your business. With that in mind, it’s a good idea to streamline your workflow and reduce administrative overhead from the get-go. The two most important business tasks to get help with are:
Getting your books in order right up front will save you headaches in the future. At the very least, you can have a professional set up your bookkeeping and accounting for you. This will save you money and time in the long run.
There are all-in-one services that will do your bookkeeping/invoicing/tax filing for you all for one monthly fee. Mazuma ($95/month) is a reliable all in one tax service.
If you have employees, a payroll service will save you a lot of time and also save you from having to become an expert on state compliance or employee tax withholdings and filings.
Gusto is a reliable and good payroll service for small businesses.
Need Help Forming an LLC?
If you’ve got too much on your agenda to worry about all the paperwork and state-requirements, there are a handful of LLC formation services that can take care of everything for you.
Here are the two most popular:
– Northwest ($49 + state fee) = Best Price & Overall Value
– LegalZoom ($79 + state fee) = Best For Brand Recognition
Note that this guide on forming a New Jersey LLC isn’t a legal document or legal advice. It’s for informational purposes and the information above is subject to change. For specific legal questions regarding how to form an LLC in New Jersey or business in general, please consult with a local attorney. We recommend JGW INcounsel/John G. Webb, III, Esq.