Starting a business can be risky. Entrepreneurs have to invest a great deal of resources into their business just to get it started, and there is no way to guarantee the business will be successful. While it is risky, it can also be very profitable for the entrepreneur. Starting a business in New Jersey has additional challenges, due to the particularly high taxes for businesses in the state as well as higher property taxes. While New Jersey may have a riskier business climate, it does not mean that new businesses cannot succeed. In fact, despite what may seem like an unsupportive climate, the state actually offers additional bonuses for businesses willing to take the necessary steps to get started.
New Jersey offers several advantages for new businesses. The state features a good mixture of both urban as well as suburban environments, which gives entrepreneurs a lot of freedom in what kind of business they want to run. The state’s proximity to New York is advantageous as well, since many suppliers operate in the city, plus it is another potential base of customers. Before an entrepreneur can officially begin their business, there are a couple of steps they must take just to register their business in New Jersey.
Naming a Business in New Jersey
It may seem like a simple step, but picking an official name is very important for new businesses. The name needs to attract attention and draw in customers, but it must also be entirely unique. Entrepreneurs can register their name with the New Jersey Department of Treasury. The Department of Treasury has a useful filter which determines whether or not a name is unique. Businesses that register with an improper name will have their registration rejected and are responsible for paying any fees to correct the registration.
New businesses can reserve a name with the Department of Treasury, but they are required to pay a small fee. How long the name stays reserved depends on the type of business.
New Jersey Business Structure
One of the most important steps for new business owners is choosing a structure to classify their business. These business structures determine who owns the business and how the business is taxed. There are a few different types of business classifications available.
The first business structure classification is known as a sole proprietorship. Under a sole proprietorship, one individual is responsible for owning the business. This means the business owner is solely responsible for anything that happens to the business. It also means that the business is taxed based on the personal income of the business owner. A variant of sole proprietorship is known as a general partnership. Under a general partnership the rules are essentially the same, but instead of one-person being responsible for the business, two or more individuals share responsibility. For determining taxes, all the business owners share their personal income and pay a single tax for the business.
The next type of classification is known as a corporation. Corporations are owned by a group of shareholders, who do not take responsibility for any debts or liabilities from the business. However, corporations are taxed at a different level. S-Corporations, which are corporations with less than 75 shareholders, are taxed at the shareholder levels. Larger corporations are taxed at a corporate and employee level.
Then, there is a limited liability company. Limited liability companies resemble corporations, but they have general partners instead of shareholders. All the general partners pay a single tax for the business. In addition, there are plans for limited partnerships. Under a limited partnership, a business owner takes responsibility for the company, but the owner is financially backed by partners. The partners do not have to assume any responsibility for the business.
The last type of structure is a nonprofit corporation. Nonprofits do not pay any taxes, since the business owner is not directly profiting from anything the nonprofit does. In addition to being approved by the Department of Treasury, nonprofits must be approved by the IRS.
Once the business structure is identified, the business can officially register their business with Form NJ-REG. If the business owner does not already have a Federal Employer Identification Number (FEIN), they should acquire one through the IRS. Business owners must complete Form SS-4 to receive their identification number, which is used for tax purposes to identify the business.
New Jersey Business Licenses and Regulations
After identifying the business structure, the next step for the business owner is to determine whether or not he or she needs additional permits. Whether or not a business needs licenses or must follow specific regulations depends entirely on the business as well as the county in which the business operates. Business owners must contact the municipality in whichever county they are opening their business. Business owners can also reach out to the Business Action Center to learn more.
If a business has even a single employee, one of the regulations they must follow is registering for employer insurance, unemployment insurance and worker’s compensation insurance. Registration can be obtained through the New Jersey Department of Labor and Workforce Development.