MORRIS COUNTY — Amidst the coronavirus pandemic and the economic difficulty it has caused, the state of New Jersey has begun to position itself as a hub for startup activity. This is something of an ambitious notion, but the fact is that the economy will begin to recover at some point. And when it does, New Jersey will have an opportunity to benefit from new, local businesses.
One reason for this sense of optimism is that the existing New Jersey Innovation Evergreen Fund is well-positioned to help new companies emerging in the months and years ahead. Spotlight News wrote about the NJIEF and conveyed that the fund is poised to pump much-needed capital into new businesses and help to get people of New Jersey back to work in good-paying jobs. Also notable is the fact that Governor Phil Murphy recently made the notion of angel investment more attractive in New Jersey. Murphy’s signing of Bill A5604 in the summer of 2019 increased the angel-investor tax credit from 10% to 20% — effectively incentivizing investment in new and emerging businesses.
Government funds and incentive strategies of this nature may not always make headline news. But at a time like this, they’re exactly the kinds of behind-the-scenes efforts that can lead to surges in innovation and entrepreneurship. So, in support of innovation throughout the state, we decided to address the most fundamental question hopeful entrepreneurs may have: How do you actually start a business in New Jersey?
As is made clear in a ZenBusiness guide to forming an LLC in New Jersey, there are basically six formal steps involved. To list them quickly, they are as follows: naming the business; choosing a registered agent; filing Articles of Formation; registering the business for tax filings; creating an Operating Agreement; and applying for an EIN for taxes. To explain the process in a little bit more detail, we’ll address these points one by one.
Naming the Business – This is almost as simple as it sounds, though there are a few things worth keeping in mind. First is that the name must be unique in New Jersey (and you can check the New Jersey Business Record database to make sure that it is). Second is that the company must formally be called “LLC” or “Limited Liability Company.” Beyond these notes though, it’s as simple as making the name you want official.
Choosing a Registered Agent – A registered agent is either an individual (over 18) or a “business in good standing” in New Jersey, who is authorized (and required) to formally accept any legal papers the business may need to receive. You simply need to make a decision as to who or what your registered agent will be, and make it official with the state.
Articles of Formation – The Articles Of Formation are basically a form you have to fill out online, at the Division of Revenue Business Formation. In order to fill them out and submit them, you’ll need basic information about your company (address, type of business, name, names of managers, etc.) and $125 to pay a fee.
Register for Tax Filing – For this step you simply need to approach the New Jersey Division of Revenue and Enterprise Services, either online or via mail, to register your LLC as a business entity. This is important to do even if you’re an independent business owner without employees because in New Jersey such a business still has to pay a (small) minimum state tax.
Create an Operating Agreement – This is actually not an official step required by the state of New Jersey, so much as one recommended for businesses in general. Per The Balance’s overview of operating agreements, this is a “what if?” document that “serves as a guide through the process of dealing with questions of ownership and business management.” It’s essentially a thorough write-up of business details, from the LLC’s name and intended duration, to what the termination process is for employees, to the company’s liability clause. A thorough, well-composed operating agreement can be an essential point of reference, particularly for a growing LLC.
Apply for an EIN – This is something you can do online with the IRS. It’s a simple application that results in your new business being assigned an Employer Identification Number, which is required for filling out taxes. Note that this step is not necessary if you’re the only member of your LLC and have no employees.
And that’s the whole process! Naturally, there’s much more you’ll need to do in order to set up the business itself. But making it official with the state requires only that you go through the steps above.
Hopefully, this will be of assistance to any of you who may be thinking about starting companies as New Jersey looks to rebound with a focus on local innovation.