Forming A Corporation
Jan. 2, 2023
In New Jersey, there are several different types of corporate structures that can be registered, including:
Corporation: A corporation is a separate legal entity from its owners, meaning that it can enter into contracts, own assets, and incur liabilities in its own name. Corporations can be either for-profit or not-for-profit, and they are owned by shareholders who hold stocks in the corporation.
Limited liability company (LLC): An LLC is a business structure that combines elements of both a corporation and a partnership. Like a corporation, an LLC is a separate legal entity from its owners and offers liability protection for its owners (called "members"). However, unlike a corporation, an LLC is not required to have a board of directors or hold annual meetings.
Limited liability partnership (LLP): An LLP is a business structure that is similar to a partnership, but offers liability protection for its owners (called "partners"). This means that partners are not personally liable for the debts or obligations of the LLP, but are still responsible for their own actions and omissions. LLPs are typically used by professionals, such as lawyers or accountants, who want to limit their liability while still operating as a partnership.
Sole proprietorship: A sole proprietorship is a business structure in which a single individual owns and operates the business. The owner is personally liable for the debts and obligations of the business, and there is no legal separation between the owner and the business.
Partnership: A partnership is a business structure in which two or more individuals own and operate the business together. Partners are personally liable for the debts and obligations of the partnership, and profits and losses are shared among the partners according to the terms of the partnership agreement.
Each type of corporate structure has its own advantages and disadvantages, and the best option for your business will depend on your specific needs and goals.
To form a corporation in New Jersey, you will need to follow these steps:
Choose a business name: You must choose a unique name for your corporation that is not already in use by another business in New Jersey. The name must also comply with the state's naming rules and cannot be misleading or confusing.
File articles of incorporation: You will need to file articles of incorporation with the New Jersey Division of Revenue. This document must include information about your corporation, such as its name, business address, and the names and addresses of the incorporators.
Appoint directors: Your corporation must have a board of directors, who are responsible for overseeing the management of the company. You will need to appoint the initial directors of your corporation and hold an organizational meeting to adopt bylaws and elect officers.
Obtain any required licenses and permits: Depending on the nature of your business, you may need to obtain specific licenses or permits in order to operate legally in New Jersey. You should research the requirements for your business and apply for any necessary licenses or permits.
Issue stock: If your corporation plans to issue stock, you will need to determine the number and type of shares to be issued and issue the stock to the initial shareholders.
Register for state taxes: You will need to register your corporation for state taxes, including sales tax, unemployment insurance tax, and any other applicable taxes.
It is important to carefully follow the steps required to form a corporation in New Jersey in order to ensure that your business is legally compliant and properly organized.
C or S Corporation
The main difference between a C corporation and an S corporation is the way they are taxed.
A C corporation is a type of corporation that is taxed as a separate entity. This means that the corporation pays taxes on its profits at the corporate tax rate, and any profits distributed to shareholders as dividends are taxed again at the individual level. This is known as "double taxation."
An S corporation, on the other hand, is a type of corporation that elects to be taxed as a pass-through entity. This means that the corporation itself does not pay taxes on its profits. Instead, the profits and losses of the corporation are passed through to the shareholders, who report them on their personal tax returns and pay taxes at the individual rate. This is known as "pass-through taxation."
There are some other differences between C corporations and S corporations as well. For example, C corporations can issue different classes of stock, while S corporations are generally limited to one class of stock. C corporations also have no restrictions on ownership or the types of shareholders they can have, while S corporations have stricter rules in these areas.
Ultimately, the decision between forming a C corporation or an S corporation will depend on your specific business goals and needs. You should carefully consider the advantages and disadvantages of each option and seek legal or professional advice before making a decision.
To maintain the registration of a corporation in New Jersey, you will need to follow certain requirements and procedures, including:
File annual reports: You are required to file an annual report with the New Jersey Division of Revenue each year. The report must include information about your corporation, such as the names and addresses of the directors and officers, and any changes to the corporation's business address or business activities.
Hold annual meetings: You are required to hold annual meetings of the corporation's board of directors and shareholders. At these meetings, you will need to elect directors and officers, adopt bylaws, and conduct any other necessary business.
Pay taxes and fees: You will need to pay any applicable taxes and fees, including state taxes and franchise fees.
Maintain records: You will need to maintain accurate and up-to-date records of your corporation's business activities, including financial records, meeting minutes, and any other relevant documents.
Comply with state laws: You will need to comply with all state laws and regulations that apply to your corporation, including those related to business practices, employment, and consumer protection.
By following these requirements and procedures, you can help ensure that your corporation remains in good standing with the state of New Jersey and is able to continue operating legally. If you have any questions or need assistance, you may want to consider seeking the advice of an attorney or professional business services provider.