Introduction
NJ Law Help can assist you in all your commercial legal needs, from business startup to complex commercial litigation.
Starting your own business can be an exciting and intimidating endeavor, but with experienced and competent legal assistance, you can focus on the business and leave the technical complexities of necessary corporate filings and preparation of necessary documentation up to us.
Do you have or will have multiple shareholders or partners? A Shareholder or Partnership Agreement might be right for you. Not everyone needs to have a complex agreement prepared, but you should discuss the specifics of your business relationship with an experienced attorney to determine what is best for your particular needs.
Inevitably, every business will be involved in litigation. Whether it’s because someone owes you money, or alleges you owe them money. The potential implications of civil actions necessitate an attorney who is dedicated to your cause, who understands the importance of the outcome to your reputation and success, and has the experience to handle complicated litigation.
At NJ Law Help, we understand that your business is extremely important to you, and that you are devoted and work-hard to make it a success. We are here to help you resolve the legal issues, so you can stay focused on running your business.
Business basics
Write a business plan
The first step in making a decision to start a business is to write a business plan. Whether big or small every business should have a written business plan before moving forward.. If you have never written a business plan before there are resources that can assist you. We recommend the New Jersey Small Business Development Centers, which have offices in every county. To find an office near you call 800-432-1565 or visit www.njsbdc.com.
What type of business should I choose?
There are different business structures you can choose when organizing your first business. You should have a good understanding of the pros and cons of each type. It is strongly recommended that if you are unsure of which structure is best for your business you should seek professional advice from an attorney or accountant.
Sole Proprietorship
• Advantages
◦ Low start-up costs
◦ Greatest control by owner
◦ Minimum working capital requirements
◦ Tax advantage to small owner
◦ All profits to owner
• Disadvantages
◦ Unlimited personal liability
◦ Lack of continuity
◦ More difficult to raise capital
Proprietorship
• Advantages
◦ Ease of formation
◦ Low startup costs
◦ Additional sources of venture capital
◦ Broader management
◦ Limited outside regulation
• Disadvantages
◦ Unlimited personal liability
◦ Lack of continuity
◦ Divided authority
◦ Difficulty in raising additional capital
◦ Hard to find suitable partners
Limited Liability Company
• Advantages
◦ Limited liability
◦ Flexible management structure and ownership
◦ Continuous existence
◦ Legal entity
◦ Easier to raise capital
• Disadvantages
◦ More expensive to organize then a proprietorship or partnership
◦ More regulations then a proprietorship or Partnership
Corporation
• Advantages
◦ Limited liability
◦ Specialized management
◦ Ownership is transferable
◦ Continuous existence
◦ Legal entity
◦ Easier to raise capital
◦ Unity of action account having centralized authority in board of directors
• Disadvantages
◦ Closely regulated
◦ Lack of continuity
◦ Charter restrictions
◦ Extensive record-keeping necessary
◦ Double taxation, except when organized as an “S” Corporation
◦ Difficult to liquidate investment
Starting a Business Checklist
Determination of business Name and its registration
The first step towards starting a business involves deciding the legal form of your business. The following are possible scenarios:
• A sole proprietorship or general partnership will generally use a “trade name.” If you intend to do business under your own name, then no trade name registration is required. Registration is only considered advisable. If you intend to operate a Sole Proprietorship or General Partnership using a business name, then you must contact the County Clerk’s Office of the county in which the business will be located for registering a trade name. This registration at the county level is compulsory. The registration protects that name from use by other businesses within that county. If you are interested in reserving the trade name in other counties then you must register that name in those counties as well. To protect the name statewide you should register the name in each of the State’s 21 counties.
• If your business is going to be a Corporation, a Limited Liability Company (LLC), or a Limited Liability Partnership (LLP) then you must Register a New Business Entity with the Division of Commercial Recording, New Jersey Department of Treasury. You can take advantage of New Jersey’s easy to use online services to register your business entity by visiting www.NewJerseyBusiness.gov and clicking on the “Starting a Business” tab. You can also contact the division directly at Division of Commercial Recording, PO Box 308, 33 West State St., Trenton, New Jersey, 08625-0308 or call 866-534-7789.
Registration of the business
All businesses must “Register for Tax and Employer Purposes” with the New Jersey Division of Revenue, regardless if they plan on collecting sales tax or having employees. You may now register your business for taxes and employer contributions for unemployment and disability, online at www.NewJerseyBusiness.gov and clicking on the Starting a Business Tab. You may also contact the Division of Revenue, Client Registration Bureau by calling 866-534-7789.
The IRS will allow a sole proprietorship or a single member LLC with no employees to use the owner’s social security number for federal tax purposes. However other business entities and all businesses with employees are required to obtain a Federal Employee Identification Number (FEIN) from the IRS. You can obtain a FEIN by filing a form SS-4 with the IRS or by visiting the IRS Web site at www.IRS.gov.
Taxation
All businesses must pay taxes. When you register your business, the State of New Jersey will send pertinent forms and information necessary for compliance with the New Jersey tax laws. It is important to include either a social security number or a Federal Employer Identification Number (FEIN) on all returns, checks, and other correspondence sent to the State of New Jersey.
Local permits and other regulations
All businesses should contact the municipality and county in which the business is located to determine if there are any local regulations to which the business must adhere. Also check whether any permits are required for your business to operate.
Business licenses and certification
Depending on the nature of your business, the State of New Jersey may require that you either obtain a license, certification, or registration. The New Jersey Online License & Certification is available online at: www.NewJerseyBusiness.gov.
This site lists various types of businesses and their requirements. You can also contact the Business Action Center at 866-534-7789 to obtain license/certification information.
If you have at least one employee, you are required to address the issue of employer insurance. Information on employer insurance and other responsibilities can be found at www.NewJerseyBusiness.gov. Just click on Workforce Training and Programs for a list of Employer’s Responsibilities. You may also contact the following departments for information on your insurance responsibilities:
• Unemployment Insurance: If you have at least one employee, registration is required with the Division of Employer Accounts, New Jersey Department of Labor and Workforce Development, PO Box 913, Trenton, New Jersey 08625-0390. For information in North Jersey call (Newark) 973-648-4109, in Central Jersey (New Brunswick) 732-418-3331, and in South Jersey (Camden) 856-614-3764.
• Workers’ Compensation Insurance: Information regarding Workers’ Compensation accidents may be obtained by contacting the Division of Workers Compensation, New Jersey Department of Labor and Workforce Development, PO Box 381, Trenton, New Jersey 08625-0381, 609-292-2515. For coverage information, contact your insurance provider, or the Compensation Rating and Inspection Bureau at 60 Park Place, Newark, New Jersey 07102, 973-622-6014.
Additional requirements for out-of-state firms
If you are not located in the State of New Jersey but intend to start your business here, there are some additional requirements that you need to fulfill:
Corporations, LLC and Limited Partnerships:
It is necessary to register a new business entity and register for tax and employer purposes, but you will be registering as a “Foreign” Corporation, LLC, LLP or LP.
General Partnerships and Sole Proprietorships:
It is necessary to obtain a “Trade Name Certificate to Operate” from the Clerk in each county where business will be conducted. You will also need to Register for Tax and Employer Purposes.
Out-of-State Payroll Record keeping:
A permit must be acquired from the Division of Workplace Standards, Office of Wage and Hour Compliance, New Jersey Department of Labor & Workforce Development, 609-292-7860.
Business taxes and other tax resources
Which tax and employer obligations apply to my business?
Generally, your tax and employer obligations are established and maintained by the State depending on the information that you provide in your business registration documents. If you have already registered, you may call the Client Registration hotline at 609-292-9292 for assistance and general information on your tax and employer obligations.
If you have not registered your business and wish to see the types of obligations you may have as a business owner you can visit The Tax Center.
NJ income tax - withholding
Employee Compensation
Generally, when someone works for you and that person is considered to be your employee for Federal income tax purposes, he or she is also your employee for State income tax purposes.
Employee compensation, including salaries, wages, tips, fees, commissions and bonuses are subject to New Jersey gross income tax withholding. In most cases, compensation that is considered wages for Federal income tax purposes is subject to New Jersey withholding. There are, however, benefits which are not subject to Federal withholding that are subject to withholding in New Jersey.
As a New Jersey employer, you are required to withhold New Jersey income tax from wages paid to all New Jersey residents unless you are withholding another jurisdiction's income tax at a rate equal to or greater than New Jersey's rate. You must also withhold New Jersey income tax for nonresident employees physically working in this State. Pennsylvania residents are the only out-of-state residents exempt from New Jersey withholdings. As a result of the Reciprocal Income Tax Agreement between New Jersey and Pennsylvania, compensation earned in New Jersey by a Pennsylvania resident is not subject to New Jersey Gross Income Tax. If you employ a Pennsylvania resident in New Jersey, that employee should complete an Employee's Certificate of Non-residence in New Jersey (Form NJ-165) and file it with you. Once an employee has provided you with a completed Certificate of Non-residence you must stop withholding New Jersey income tax.
To determine the amount of New Jersey income tax to be withheld from employees' wages, use the withholding tables or percentage methods contained in the New Jersey Gross Income Tax Instructions for Employers (Form NJ-WT) and Supplemental Withholding Tables (Form NJ-WT Supplemental).
Withholding requirement for payments to contractors
Beginning January 1, 2007, any person (other than a governmental entity, a homeowner, or a tenant) who maintains an office or transacts business in New Jersey is required to withhold New Jersey gross income tax at the rate of 7% from payments made to unregistered, unincorporated contractors for services performed in this State. See Withholding Requirements for Construction Contractor Services.
Worker’s Compensation insurance
Insurance requirements
Insurance coverage may be obtained in one of two ways:
• Workers’ Compensation Insurance Policy written by a mutual or stock carrier authorized to write insurance in New Jersey. Premiums for such insurance are based on the classification(s) of the work being performed by employees, the claims experience of the employer and the payroll of the employer.
• Self Insurance through application to and approval by the Commissioner of the Department of Banking and Insurance. Approval for self-insurance is based upon the financial ability of the employer to meet its obligations under the law and the permanence of the business. The posting of security for such obligations may be required.
A self-insured employer has the option of administering its own workers’ compensation claims or contracting with a third party administrator (TPA) to provide these services. For more information about self-insurance, please refer to N.J.S.A. 34:15-77 of the New Jersey Workers’ Compensation statute or contact the Department of Banking and Insurance at (609) 292-5350 ext. 50099.
Note: Governmental agencies are required to provide workers’ compensation benefits to their employees but are not required to purchase insurance or receive approval as a self-insurer. They generally either 1) obtain an insurance policy 2) participate in an insurance pool, or 3) maintain a separate appropriation for workers’ compensation.
Who must insure?
The following employing entities must have workers' compensation insurance in effect:
Corporations – All corporations operating in New Jersey must maintain workers' compensation insurance or be approved for self-insurance so long as any one or more individuals, including corporate officers, perform services for the corporation for prior, current or anticipated financial consideration *.
Partnerships/LLC's – All partnerships and limited liability companies (LLC's) operating in New Jersey must maintain workers' compensation insurance or be approved for self-insurance so long as any one or more individuals, excluding partners or members of the LLC, perform services for the partnership or LLC, for prior, current or anticipated financial consideration*.
Sole Proprietorship – All sole proprietorships operating in New Jersey must maintain workers' compensation insurance or be approved for self-insurance so long as any one or more individuals, excluding the principal owner, performs services for the business for prior, current or anticipated financial consideration*.
* Financial consideration means any remuneration for services and includes cash or other remuneration in lieu of cash such as products, services, shares of or options to buy corporate stock, meals or lodging, etc..
Consequences for failure to insure
The consequences for failure to provide workers’ compensation coverage can be very significant, even without a work-related injury. Specifically, the law provides that failing to insure is a disorderly persons offense and, if determined to be willful, a crime of the fourth degree. Moreover, penalties for such failure can be assessed up to $1,000 for the first twenty days with additional assessments of $1,000 for each ten-day period of failure to insure thereafter. In the case of a corporation, liability for failure to insure can extend to the corporate officers individually. Penalties assessed for failure to insure are not dischargeable in bankruptcy.
Where a work-related injury or death has occurred, the employer, including individual corporate officers, partners or members of an LLC, is directly liable for medical expenses, temporary disability and permanent disability or dependency benefits. In addition to awards for medical expenses and other benefits, New Jersey law also provides for civil penalties against the employer and its officers where failure to insure is determined. Awards and penalties arising from these claims can become liens against the uninsured employer and its officers, which are generally enforceable in the New Jersey Superior Court against any assets belonging to the uninsured employer and its officers.
If you are aware of an uninsured employer, you may provide this information to the Office of Special Compensation Funds by e-mail, by calling (609) 292-0165 or by completing a "Report of Non-Compliance "form. The form is interactive, so you can type directly into the fields. You can also e-mail the completed form by hitting the "E-Mail" button on the form.
You do not need to identify yourself but you should be prepared to provide the name and exact address of the employer and, if possible, the names of the principle operators of the business.
Insurance cross-match program
The Office of Special Compensation Funds, on a regular basis, conducts a cross-match of their database with the Department of Banking and Insurance's Compensation Rating and Inspection Bureau (NJ CRIB) on a regular basis to identify uninsured employers.
When an employer is identified through this cross match as a possibly uninsured employer, a letter and across-match response form is issued. Mandatory insurance should be immediately obtained if an employer is uninsured and verification of insurance must be provided. Penalties may still be assessed for failure to have insurance at the time of the cross-match.
If you are an employer that has insurance and has received this form, you should provide the information requested about your workers’ compensation coverage as soon as possible to ensure that penalties are not improperly assessed against you.
Questions in relation to the Cross-Match Program can be addressed to:
Office of Special Compensation Funds
Cross Match Program
P.O. Box 399
Trenton, NJ 08625-0399
Fax (609) 633-7783, (609) 984-2515 or (609) 292-7294
[email protected]
Rate setting and premium information
The Compensation Rating and Inspection Bureau (NJCRIB), an agency in the New Jersey Department of Banking and Insurance, is responsible for establishing and maintaining regulations and premium rates for workers’ compensation and employers liability insurance.
You can obtain workers’ compensation insurance coverage from any of the more than 400 private licensed insurance companies authorized to sell workers’ compensation policies in New Jersey. You can purchase a policy directly from an insurance carrier, an insurance agent or an insurance broker. For further assistance with obtaining coverage, please contact the NJ Compensation Rating & Inspection Bureau at:
60 Park Place
Newark, NJ 07102
(973) 622-6014
Fax (973) 622-6110
www.njcrib.com
