Information About Business Types
We have written this informational page for new businesses, or an existing business that is thinking about changing to an LLC. This article is for information only and is not for legal purposes. We are not attorneys and advise you to contact an attorney for proper legal advice.
A business can be conducted under . . .
- Natural – personal name (owner’s name)
- Trade name
Most new businesses form LLC’s. The purpose of forming an LLC is to separate the business from the owner’s personal assets. If you own your own home, this is highly recommended. If something happens in the business where somebody sues the owner, then the LLC makes it harder to go after the owner’s personal assets such as one’s home, etc. Most lawyers will agree with this, however an LLC does not provide absolute protection. The LLC shield can be pierced. If you have further questions, please contact an attorney.
You cannot just put the initials LLC after your business name. You must form this legal entity. See below.
When a corporation or LLC is formed it will be registered with the 21 counties in NJ automatically. You can form a corporation or LLC online yourself, through an attorney, with an accountant, or through a legal filing service.
Information about forming a corporation or LLC: go to: http://www.state.nj.us./njbgs/ (new Jersey Business Gateway Services)
NJ Treasury website with information on forming a business entity: http://www.nj.gov/treasury/revenue/gettingregistered.shtml
Direct link to NJ Treasure website to form a business entity: https://www.njportal.com/DOR/BusinessFormation/Home/Welcome/
Natural name is your own birth name – personal name with nothing added to it. Example: John Doe, James Franchino. A natural name does not have to be registered with the state of NJ or with a county. No legal protection is provided.
A trade name is the name an individual transacts business under. A trade name must be registered in the county that the owner either lives or transacts business in. This unique trade name is the only registered trade name in the county. Someone in another county can have the same trade name. There are 21 counties in NJ. If you want to register a trade name, simply go down to your county court house hall of records and tell the clerk you want to form a trade name. The clerk will show you how to do a search. The cost to register a trade name is from $35. to $50. A trade name certificate will be issued. When transacting under a trade name, an employer indentification number (EIN), or federal identification number (FEIN), (same thing), does not have to be used, however one can (and should) be used. See below on how to obtain one instead of using one’s social security number.
LLC (LIMITED LIABILITY COMPANY)
The full name is Limited Liability Company. That’s company not corporation! You cannot use this title unless you form an LLC. You cannot tack on “LLC” to your name or trade name. An LLC can be formed one of several different ways.
When forming an LLC the name gets registered throughout all 21 counties of New Jersey.
1) Form an LLC yourself through the State of NJ website. The cost is $125. At the end of the procedure you pay by credit card. Hints: Do NOT type LLC at the end of the business name. The formation procedure will assign the LLC to your name. If you start the procedure and exit, the business name that you typed in will be locked for 24 hours. Wait 24 hrs., then go in again and start all over.
This website provides information (NJ Business Gateway Services): http://www.state.nj.us/njbgs/
This website takes you directly to the formation page: https://www.njportal.com/DOR/BusinessFormation/CompanyInformation/BusinessName
After forming an LLC you need to have an operating agreement. See LAWDEPOT.COM or google “NJ LLC operating agreement” and you will find companies where you can do this online. LAW DEPOT
After you form the LLC through the NJ state website they will ask you if you want to register for a FEIN#. If you say yes, they will take you to the Federal Treasury website. Information. There is no cost to register a FEIN# Please make sure that you ALWAYS use this number for your business. NEVER use your social security number once you have a FEIN#!
After obtaining a FEIN# the site may ask you if you want to register for the NJ Sales Tax. You should say yes. The link will take you to the NJ Treasury website where you can register to pay sales taxes. NJ Treasury
When registering they will ask for your 10 digit ID ) This is the number that was provided on the top of the the LLC formation certificate) They will also as for your FEIN# That you obtained in the above step.
When you provide services for your customer you are required to collect 7% sales tax. You need to complete a report every month whether or not you collect sales taxes or not and pay the state of NJ
2) Legal Service
If the above procedure sounds overwhelming, you can have a company like Legal Zoom or Capital Information Services form an LLC for you. (also search the internet) Their cost is around $300. They form the LLC, get you and EIN / FEIN# and also write a simple LLC operating agreement for the business. They do not register you with the State of NJ for sales taxes as described above. You or your accountant must do this.
Most accountants can form an LLC for you. Accountants also provide valuable information and you will also need one when filing your taxes properly and for tax advice. Cost is from $300. to $500. Please choose a CPA (certified public accountant)
Most attorneys can form the LLC for you too. They provide legal advice which an accountant cannot do even though they are of a great help. Cost is from $500. to $1,500.
The procedure to form a corporation is the same as an LLC. A corporation is different than an LLC in that a corporation is “owned” by stockholders. Stockholder have a share in the corporation. There are standard “C” corporations and “S” corporations. Please contact an attorney for the full explanation.
FOUR STEPS IN FORMING AN LLC – NEW BUSINESS
If you want to form an LLC yourself here is a link to the State website: https://www.njportal.com/DOR/BusinessFormation/CompanyInformation/BusinessName
There are four steps when forming an LLC
1) Form the LLC, by doing it yourself or using a service, accountant, or attorney
3) Create an operating agreement. Attorneys and business formation services usually include the creation of an operating agreement
2) Obtain a Federal tax ID # (FEIN#) Attorneys, accountants and business formation services usually include the process of obtaining an FEIN#
3) Register with the State of NJ, Dept. of treasury to pay sales / service taxes. Attorneys and business formation companies may NOT register your business with the NJ Treasury. Please ask if this service is included.
NJ Division of Taxation – register, update, change a business, etc. NJ Division of Taxation
State of NJ Business Portal NJ Business Portal
New Jersey Business Gateway Services is a great website for starting, and maintaining a businesses. See NJ Business Gateway Services
This agency does not form LLC’s, corporations, or trade names. We will try to answer your questions, however attorneys and accountants are your best source.
We are glad to be of help in the start-up of your business. All we ask is the opportunity to write your insurance. This agency can provide ALL your business insurance needs.
James C. Franchino