Starting a business in New Jersey can be a challenging but rewarding experience. There are various business structures to choose from, including the S-corporation (S-corp) which offers many tax benefits for small business owners. In this article, we will discuss the steps involved in starting an S-corp in New Jersey.
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What is an S-corp?
An S-corp is a special type of corporation that allows profits, losses, and tax credits to be passed through to individual shareholders, rather than being taxed at the corporate level. This makes the S-corp a popular choice for small business owners who are looking to minimize tax liability.
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Step 1: Choose a Name and Register Your S-corp
Choosing the right name for your business is vital. The name must be available and not already taken. You need to check with the New Jersey Division of Revenue to find a name that is not in use. The name should also be unique but representative of what your business does. You will also need to file the New Jersey Business Entity Formation Certificate with the Division of Revenue. This registration will cost $125, and it will officially establish your S-corp as a business entity in New Jersey.
Step 2: Select Your Board of Directors
The board of directors manages an S-corp and is responsible for making major business decisions, hiring officers, defining company policy, and overseeing the company's finances. You should select a group of competent and experienced professionals who can help steer your business in the right direction.
Step 3: Appoint Officers of the S-corp
The officers of the S-corp are responsible for carrying out the day-to-day operations of the company. Your officers can include positions such as President, Vice President, Secretary, and Treasurer. You can select a minimum of one and a maximum of fifteen officers. Remember, all officers must be elected by the board of directors.
Step 4: Obtain Necessary Licenses and Permits
Several businesses in New Jersey need certain licenses or permits. Before starting your S-corp, you would need to conduct detailed research to ensure if you require any licenses. You should visit the New Jersey Business Portal to find out which permits and licenses apply to your business structure. Although, in New Jersey, some municipalities have their own licenses as well, so it's vital to ask them about this to become informed.
Step 5: Obtain an EIN
An Employer Identification Number (EIN) is a unique tax ID number that the IRS assigns to your business. You need an EIN if you have employees, operate a partnership, or an S-corp. Most online sources suggest that obtaining an Employer Identification Number (EIN) is simple and straightforward. You can file online and receive an EIN within minutes.
Step 6: Register for State/Local Taxes
Every business entity that operates as a corporation or LLC has to register for taxes with the state. You can visit New Jersey's Division of Taxation page for corporate registration of taxes. You must register for sales tax, employee tax (if applicable), and other related taxes. These registrations ensure you avoid legal ramifications like fines and penalties.
Conclusion
Starting an S-corp in New Jersey involves paperwork and legal work that's pretty similar to setting up any other corporate structure. Once it is established, however, an S-corp provides a range of tax benefits, flexibility and management for business owners. Let this process serve for you as a crucial step as a budding entrepreneur, creating an entity from scratch. By doing so, you will gain new skills and see your company flourish with room for growth, expansion, while you peaceably reap the rewards of choosing skilled directors and rewarding their efforts with patronage.
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