Starting a Business in New Jersey
New Jersey offers an ideal environment for conducting business. Its large urban population and excellent business support ensure that you will get enough business opportunities and assistance to survive and flourish. However, opening a business is not easy. Depending on what kind of business you wish to start, you may have to do a lot of paperwork and planning. Then again, the rewards that come with a successful business will make all your effort worthwhile. Here is a guide on how to start a business in New Jersey.
Benefits of Starting a Business
While owning a business is riskier than working for someone else, it offers many great benefits. First of all, it allows you to become your own boss. You will have more control of your career, schedule and goals, meaning that you do not have to follow instructions on a regular basis.
Opening a business also gives you the opportunity to earn a much higher income than being employed. A business has the potential to grow from a neighborhood store to a company with a few locations to a national or international chain. Besides making you wealthy, a successful business also gives you a great sense of achievement. You will feel good knowing that you are the main reason behind its success.
Creating a Business Plan
Planning is the key to business success. By creating a business plan, you will have a clear idea of what you need to do to achieve your goals. Your business plan should include an analysis of different aspects of your company and the measures you plan to take to overcome problems and meet your objectives and targets. It should have the following sections:
- Overview of your company
- Industry analysis
- Market analysis
- Competitive analysis
- Product design and development
- Management analysis
- Marketing analysis
- Operational analysis
- Financial analysis
Depending on your needs and preferences, you can create a business plan once every one to five years. It is important to review your business plan whenever there are changes that significantly affect your business, such as the emergence of new trends and technologies, sudden spikes in costs or unexpected profit or loss levels.
Choose an Appropriate Business Structure
The next thing you need to do is choose an appropriate business structure. This is an important decision because it can have an impact on the amount of paperwork you need to do, the amount of taxes you need to pay, the management structure of your company and your ability to secure funding. While there are many different business structures available, most business owners choose one of the four following structures:
If you are planning to run the business on your own or with just a few employees, you should consider adopting a sole proprietorship structure. This is the easiest type of business to set up, because it requires minimal paperwork and registration procedures. In this type of structure, the business is not separate from its owner. You will have your personal assets tied to your business, making you personally liable for its financial obligations. However, you will have full control of your business and pay taxes at the individual level.
If you want to reduce your business risk, you can start a partnership instead of a sole proprietorship. In a partnership, two or more individuals share management and profits or losses. This business structure handles taxes the same way a sole proprietor does, allowing taxes on profits to pass through to its owners. It also does not offer personal liability protection for its owners.
There are two types of partnerships: general partnership and limited partnership. In a general partnership, the owners manage the business and are responsible for its financial obligations. A limited partnership, on the other hand, has general and limited partners. Its general partners perform the same functions as the owners of a general partnership. The limited partners are only investors, with no control over the business and no responsibility for its financial obligations.
Limited Liability Company
The limited liability company structure is becoming more popular among entrepreneurs because it offers the benefits of a corporation without subjecting the owners to double taxation. Similar to a corporation, a limited liability company protects its owners from being held liable for its debts and other financial obligations. However, unlike a corporation, its profits and losses are passed through to the personal tax returns of its owners.
Most major companies around the world are corporations. A corporation is considered an entity that is separate from its owners. In the event that it is involved in a lawsuit, its owners are not liable. The structure of a corporation is fixed and formal, consisting of shareholders, directors and officers. However, this business structure requires extensive paperwork and recordkeeping and is subject to double taxation.
Register Your Business
The procedures for registering your business in New Jersey vary depending on the business structure you choose. If you wish to do business under a trade name, you are required to register with your county’s County Clerk’s Office. On the other hand, if you choose to use your own name, you do not have to register your business name, although it is recommended that you do so anyway. For a limited partnership, limited liability company or corporation, you must file a new business entity with the Department of Treasury’s Division of Commercial Recording.
Register Your Business Online
Now, it is possible to register your business over the internet. To do so, you need to go to the website of the State of New Jersey and download the New Jersey Complete Business Registration Package. This package provides detailed information on what you need to do to comply with all the state regulations for business registration. The package includes:
- Business Registration Application Form
- Public Records Filing for New Business Entity Form
- Registration of Alternate Name Form
- State of New Jersey New Hire Reporting Form
- Request for Change of Registration Information Form
- Business Entity Amendment Filing Form
- CBT-2553 Division of Taxation Form
- New Jersey S Corporation Certification Form
- Request for Cigarette and/or Motor Fuel License Application Form
- License Application Form
Appoint a Registered Agent
If you are planning to start a limited liability company or corporation, you are required to appoint a registered agent. A registered agent must be a resident of New Jersey or an organization operating in the state. The function of the registered agent is to receive official documents from the state on behalf of your company.
Non-Resident Business Registration
If you do not reside in New Jersey but want open a business there, you have to undergo a different registration process. If you are starting a sole proprietorship or general partnership, you are required to obtain the Trade Name Certificate to Operate at the County Clerk’s Office in the county where your business will be located. You must also register for tax and employer purposes.
For a limited partnership, limited liability company or corporation and LLCs, the procedure is the same as that for a resident applicant, only that the company will be registered as “foreign”. Registration for tax and employer purposes is also mandatory.
Open a Bank Account for Your Business
Even if you are setting up as a sole proprietor, it is advisable that you open a dedicated bank account for your business. By doing so, you will be able to keep your personal and business finances separate. There are many banks offering competitive business accounts with great features, but not all of them are equally suitable for your company.
You should spend some time doing research and comparing different options to determine which one best suits your needs. Consider the fees, minimum requirements, online facilities, security, accessibility to loans and other concerns. When you are setting up the bank account, you should also apply for a business credit card. A business credit card can help your company build its creditworthiness and get more loans or better loan rates in the future.
Register for Tax Purposes
Regardless of business structure, all businesses in New Jersey are required to register for taxes. You can do so at the state’s Division of Revenue or online.
Also, you may have to obtain an Employer Identification Number (EIN) from the IRS. This number is like a company’s social security number. It is mandatory to have an EIN if you intend to start a corporation or limited liability company. It is optional if you are starting a sole proprietorship or partnership, but you will have to use your social security number instead. You can apply for an EIN number online at the IRS website.
Get the Necessary Licenses and Permits
If you indicate in your business registration application form that you intend to remit and collect sales tax or use a New Jersey Exemption Certificate, the state government will send you a certificate called the New Jersey Certificate of Authority for sales tax. You will be required to display this permit at a place where it is visible to your customers.
There are also specific licenses and permits that certain types of businesses need to obtain. These licenses and permits are mostly occupational licenses issued by different state agencies. If your company requires a license or permit, you are not allowed to operate your business without it.
You can find out if you need to apply for a license or permit at the “Licenses and Permits” section of the New Jersey Business Online Portal. This section lists all the types of businesses that must apply for licenses or permits and the specific state agencies you need to get in touch with in order to obtain them.
It is also important to note that every county and municipality in New Jersey has its own set of regulations and permits. As such, you also need to check with your municipality or county office to find out if you need any permit to start your business.
Get Employee Insurance
If you are planning to hire employees, you are required to register with the New Jersey Department of Labor and Workforce Development Agency at the Division of Employer Accounts. In addition, you need to obtain unemployment insurance and workers’ compensation insurance for your workers.
Choose an Ideal Location for Your Business
The location of your business can mean the difference between success and failure. If you set up shop in an over-saturated market, it will be much harder for you to sell your products or services. On the other hand, if your business is located in a town or city with a high level of unmet demand for your products, you have a much better chance of succeeding.
Every area has its pros and cons, and you need to evaluate them carefully to determine the best location for your business. There are a number of the things you need to take into consideration when choosing a business location, including:
- Availability of demand for your products or services
- Presence of competitors
- Costs, such as rent, utilities, materials, supplies and labor
- Proximity to suppliers or distributors
- Presence of other businesses that complement your business
- Growth potential
- Availability of business infrastructure and support
Find a Source of Funding
Today, a business has numerous options for securing funding. If you want to go the conventional route, you can get a business loan from a bank, credit union or financial institution. Getting a bank loan is usually the best option because it ensures that you will get competitive interest rates. Alternatively, you can try online lending. There are many individuals or organizations offering loans on online lending marketplaces and social media websites, but they usually charge higher interest rates. Other options you can try include crowdfunding and venture capital funding.
Opening a business in New Jersey requires a lot of effort, planning and consideration, especially if you wish to start a limited liability company or corporation. It is important that you conduct enough research and complete all the required procedures to ensure that your business will be properly set up. If you miss certain steps, you may find yourself having to deal with unnecessary hassles and problems. Proper planning and compliance with all regulations will give your business the smooth start it needs to establish a competitive edge and achieve success.