Last month, I created an LLC in New Jersey. My accountant was kind enough to offer to set this up for me, but after asking around, it seemed simple to do, so I gave it a shot. There were some steps where I had to 'dial a friend,' my accountant, and the N.J. small business hot line. Here is the process I went through, along with some tips and estimated timelines. If you are thinking of setting up an LLC, read this blog post first, and then let me know if it was helpful once you complete the process! Please write your comments at the bottom of the article to help clarify any steps or statements. Your feedback is appreciated and will help other entrepreneurs.
STEPS 1, 2, 3, and 4 took me three to four hours to complete:
STEP ONE: Go on line and register your new business entity. There are step by step instructions at www.newjerseybusiness.gov, if that link doesn’t work, search for ‘starting a new business in N.J.’ Or use whatever state in which you reside. You want to get to the Formation and Registration page to file a certificate of registration.
Your choices to file are for a corporation, limited partnership, or limited liability company. There is also an option to download materials if you choose not to register online.
TIP: pre-work or as you undertake step one 1) create a list of potential business names 2) write your Business Purpose in 300 characters or less 3) have business email address and phone number ready 4) decide upon and find a Registered Agent (which can be you)
The website will do an instant search for an available business name, take you through questions about the business, assign an entity ID number (EIN), and provide you with a code list to classify your business, which is needed when working with government and state agencies.
You will need the EIN in order to apply with the IRS for an Employer Identification Number, which is your company’s tax payer ID. If you plan to be the only employee technically you do not need this and can use your social security number. However, many sole-owner/worker LLCs choose to have a separate tax payer ID number to more easily distinguish personal versus business income and expenses.
CONFUSION ALERT: The state and government use the same acronym, EIN for the two different identification numbers. The state refers to the government as FEIN (f for federal).
The costs may change, but in September 2018 the Articles of Formation cost $125, A Certificate of Standing $50, and a certified copy $25. The cost a total of $203, including fees.
TIP: Save your receipt for the tax return.
NOTE: I haven’t found a purpose for the certified copy yet.
TIP: You soon will receive an email with the business registration hard copy draft, print it out right away, just in case.
Suggestion - Keep the tab open you used to create the articles of formation in step one.
STEP TWO: Now it’s time to file for your Federal EIN (tax payer ID) or as the site states EMPLOYER ID NUMBER. Open a new tab and go to https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online.
If that link doesn’t work, navigate through the www.irs.gov website to Employer ID Numbers, click Apply Online Now, Click Begin Application, and I chose LLC, although there are other options. Continue to answer the questions, one of them is to enter your state Entity Identification Number just created in step one.
You will be asked if you would like to sub-classify your business as an S Corp or C Corp for tax purposes. An LLC has 75 days to elect this declaration for the IRS, so you can decide upon this later. It’s totally fine to elect no sub-classification. Here is what I learned….
LLC with no sub-classification means the profits are passed through to the individual, and the LLC does not pay taxes or payroll. The individual pays taxes on the profits passed through, typically on a Schedule C, once all business deductions are made.
C-Corp designation means the corporation pays taxes on net profit and personal taxes are paid on the salary.
S-Corp designation pays federal and state taxes but is not subject to social security and state taxes. I believe a percentage of the profits can be passed through, however, there needs to be a quarterly payroll filing and workers compensation.
STEP THREE: You will soon receive the federal EIN via email notification. As soon as you have the number, go back to that open tab from step 2, or log into the previous website, www.newjerseybusiness.gov and complete the formation of registration process by adding your federal EIN.
TIP: Once again you will receive an email notice, this time to the updated hard copy of the business registration. Print it out for your records.
NOTE: The State of NJ, Dept. of Treasury will postal mail the “State of NJ Business Registration Certificates.” The same department will mail a ‘Notice of Appointment as Registered Agent’ to whomever you designated to act as your Registered Agent.
STEP FOUR: Remember to go back on line in approximately two days to print out 1) The Certificate of Formation 2) The Short Good Standing Certificate and 3) The Certified Certificate.
STEP 5 can take up to 3 days, as once you apply for a business bank account, depending upon the bank, there is a 0 to 3 day turnaround before the account is open and ready for the initial deposit:
STEP FIVE: Once you are able to download your documents, bring them with you to open up a business bank account. Again, this will help you to keep personal and business matters separate, for liability purposes. When choosing a bank, my advice is to keep it simple. If you’ve had or have positive experiences with a bank, it is convenient location-wise, and they offer a bank account you are looking for, then that is the business bank for you. Many customers like to pay via wire transfer, so make sure you choose an account that doesn’t charge when you receive funds or pay via wire. Many banks will waive the monthly fee if you can keep a minimum daily balance.
STEPS SIX AND BEYOND: From here on out there are various more steps, but none that will stop you from starting your first job! So get to work, and try multi-tasking while you choose a business credit card, create a logo, create a website, update your linked-in or other business profiles, target audiences via social media, and contact every one of your prior business contacts (or friends) to let them know what you’re up to! Remember to have some fun!
About the Author: Deb Alper from Alper Consulting LLC enjoys helping new businesses launch into the market place and helping established businesses re-launch their companies via channeling their dreams into concrete business plans and effective website copy. She also partners with commercial divisions of pharmaceutical companies to guide them during the global drug development and launch processes.
