How to start a business in New Jersey
Looking to start a business in New Jersey? You’ve come to the right place! Plenty of business owners and entrepreneurs have found success within the diverse culture and vibrant economy that makes up New Jersey.
Whether you want to open a restaurant, a retail store, a consulting firm or some other type of business, you'll find a supportive startup environment and a large market in the state of New Jersey.
That said, starting a business in New Jersey — or anywhere, really — comes with challenges and responsibilities you should be aware of before you dive in. Luckily, we've compiled this step-by-step guide to help you get started.
What are the steps to opening a business in the state of New Jersey?
Step 1: Develop your business idea
A business idea that works in New Jersey may not be a winner in Montana. Settling on a business idea you're passionate about and think has a good chance of succeeding in a variety of markets is one of the most exciting and challenging aspects of learning how to start a business.
If you're still working out an idea, doing some intentional brainstorming exercises can be extremely helpful. Consider gaps in the market, what you're good at and what you love doing, then get creative thinking through how you could make those things into a valuable business. You can also find inspiration from other successful businesses in New Jersey — just look for ways you could improve the service or run things more smoothly.
Have an idea already? Great! Now it’s time to vet it. You'll need to validate your idea and make sure there’s enough demand for your product or service before you go all in. You can do some market research to see if there are any other businesses in your niche and how they are doing, but if you don’t find any competitors, it could mean that there is not enough interest in your idea to make it viable in the long term.
To validate your idea, you should:
Ask for honest opinions from people you trust to test your idea and avoid wasting your time and money.
Research your industry, market, competition and trends to spot opportunities and threats, and align your business according to your findings.
Know your target audience — their needs, their wants, their problems — and create products or services that they will appreciate, and ultimately, pay for.
Embrace both good and bad feedback to enhance your business. Learn from your customers and adjust your business to their evolving preferences and expectations.
Step 2: Create your small business plan
Your New Jersey business dreams won’t get very far without a good business plan. Your plan can help you clarify your vision, strategies and financial plans for your new business, as well as help you secure any funding you may need from investors or capital lenders.
Your business plan should include everything important to your business, such as your products or services, target market, financial plans, company structure, management team and marketing strategies. The more detailed you get with it, the more prepared you’ll be to overcome challenges as you run and grow your business.
To write a good business plan, you’ll want to keep things simple and clear. Use strong words and visuals to make your points, but be honest about your goals and plans. Get feedback from others before you finalize your plan and take the time to update your plan as time goes on.
Here's what you should include in your business plan:
Executive summary
A quick overview of your business that covers your products or services, target market and competitive edge.
Company overview
A summary of your business, including its legal structure, location, history and key staff. This should give a high-level view of your business and how it works.
Mission statement
A simple and clear statement of your business’s purpose and values. It should be memorable and meaningful to your employees and customers.
Market analysis
A thorough look at your target market, including their demographics, needs and wants. This should help you know your market and how to reach them.
Management structure:
A description of your business’s management team, including their roles and duties. This should show who is in charge of what in your business.
Products and services
A detailed description of your products or services, including their features, benefits and prices. This should show potential investors or lenders what you offer.
Financials and funding
A financial overview of your business, including its projected revenue, expenses and funding needs. This should show potential investors or lenders how your business is doing financially.
Sales and marketing plan
A detailed plan for selling your products or services, including your target market, marketing channels and promotional strategies. This should show how you’ll reach your customers and sell your products or services.
Appendix
Any relevant materials or documents such as customer surveys, financial statements or marketing and branding materials. If it doesn't fit into the other categories, it goes here.
Step 3: Secure necessary funding
If you want to start your business with enough funds to get off the ground, you may consider getting a loan from a third-party lender like Heartland. Heartland specializes in helping small businesses get started and offers capital lending solutions for startups of all sizes and stages. You can get business loans ranging from $5,000 to $5 million, depending on your needs and qualifications.
You can also try crowdfunding or personal investments, but they may not be enough to cover your business needs, especially at first. Some people don’t like taking money from family or friends, either, so unless you have a lot of savings, capital lending solutions may be your best option.
However you choose to fund your business, just make sure you have what you need to put things in motion. Remember, you may need to buy or lease commercial real estate, set up a storefront, and buy inventory — so be sure to weigh your options carefully before making a decision.
Step 4: Choose your business name
Picking a business name is one of the first steps to starting a business in New Jersey. It’s like naming your first child: you want your business name to be unique, memorable and reflect your personality. Once you have a name in mind, perform a name search on the official site of the State of New Jersey to see if it’s available, and if so, you can register it online when you form your legal entity. Registering your business name will help you secure your rights to the name and stop other businesses from using it.
If you aren’t ready to form your legal entity yet, you can fill out and submit a name reservation form to keep your chosen name for up to six months. The cost to reserve a business name in the state of New Jersey is $125 for all entity types. Remember, name reservation doesn’t stop other businesses from using the name. You’ll still need to legally register your business to secure the name.
Pro tip! Reserve your website domain name
After picking a business name, it's a good idea to buy a matching domain name and set up your social media accounts. This will help you establish an online business presence and provide a way to connect with your customers online.
Step 5: Identify your business structure and business entity type
The amount of personal risk that you assume, the paperwork you'll have to complete and the funding options available all depend on which type of business entity you choose to form. Your entity also dictates how you'll be taxed by the Internal Revenue Service (IRS). Each type has its pros and cons, so you should pick the one that’s right for your specific business needs and circumstances. If you aren’t sure, it’s always a good idea to talk to an attorney or accountant before you decide.
General partnership
A general partnership is a basic business structure where two or more people share the profits and losses created by the business. All business owners in a partnership are personally responsible for the debts and obligations of the company, and there isn't any liability protection. That means if the company is sued, the owners are on the hook (many partnerships will invest in business insurance or liability insurance to protect these types of businesses).
No formal registration or paperwork is needed to form a partnership, but most partnerships will draft an operating agreement to define each owner’s roles and responsibilities and prevent any conflicts.
In terms of taxes, partners report their share of the partnership income (or loss) on their personal tax returns, as they are not legally registered companies. Each owner will then pay personal income tax, just as if they were self-employed.
Sole proprietorship
A sole proprietorship is a structure where one person (the sole proprietor) owns and manages everything. They have full control over every part of the business and make all the decisions. Sole proprietorships are easy and cheap to start, and they don’t require any formal registration or paperwork.
But like partnerships, sole proprietorships don’t have limited liability protection, so the owner is responsible for covering debts and liabilities which could negatively affect their personal assets in the case of a lawsuit or creditor collection process.
Sole proprietors report their income and expenses on their annual tax returns for personal income taxes, as the IRS considers all of their profit to be personal income.
Limited liability company (LLC)
A limited liability company (LLC) is a type of business that shields its owners from being personally liable for the business’s debts or liabilities with limited liability protection. LLCs can have one or more owners, and the owners can be individuals, corporations, other LLCs or foreign entities. To start an LLC in New Jersey, you need to file a certificate of formation with the New Jersey Department of Treasury: Division of Revenue & Enterprise Services.
One of the benefits of forming an LLC is that you can choose how you want to be taxed — either as a pass-through entity or as a corporation. If you choose to be taxed as a pass-through entity, the income and expenses of the LLC will be taxed on the owners’ individual tax returns as personal income. If you choose to be taxed as a corporation, the LLC will be taxed separately from its owners, and double taxation would apply.
A New Jersey LLC owned by one person is required to file Form 1040 with the IRS, while multi-member LLCs need to file Form 1065.
Subchapter "S" corporation (S corp)
An S corp is a registered corporation that has chosen to be taxed as a pass-through entity. This means that the income and losses of the S corp are taxed on the shareholders’ individual tax returns as personal income. This way, S corps can avoid the double taxation that normally applies to corporations.
To become an S corp, a corporation must meet certain requirements, such as having no more than 100 shareholders, issuing only one class of stock and having shareholders that are either individuals, estates, trusts or certain types of charitable organizations. If a corporation meets these requirements, it can file Form 2553 “Election by a Small Business Corporation” with the Internal Revenue Service to formally elect S corp status.
Subchapter "C" corporation (C corp)
A C corp is a type of business that is completely separate from its owners or shareholders. This means that the corporation is its own legal entity, and it's able to shield its owners from being personally liable for any debts or liabilities that the corporation incurs.
C corps can raise funds more easily than other entity types because they're able to have as many shareholders as they want, and can trade publicly to individuals, corporations or other entities. However, they also face double taxation, which means that the C corp pays corporate taxes on its income, and then each shareholder pays personal income taxes on the dividends that they receive.
C corps also need to file annual reports, elect a board of directors and hold an official meeting for their shareholders every year. Businesses forming a New Jersey corporation have to file Form 1120 with the IRS.
Nonprofit organization
A nonprofit organization is a type of business that doesn’t have to pay federal income taxes on its income, as long as it uses its income for charitable purposes (and doesn’t engage in political activities). Nonprofits can raise funds by receiving donations, and the donations are typically tax-deductible for the donors. Nonprofits also have the same limited liability protection as other registered corporations.
To be eligible for the tax-exempt status of a nonprofit, the business must meet certain specific requirements. It is imperative that the business has a charitable purpose that benefits the public interest, and it cannot be used to earn a profit. Any profit that is created must be invested back into the business in order to further its mission.
To apply for tax-exempt status, a nonprofit must file Form 1023 with the IRS. Once a nonprofit has been granted tax-exempt status, it must file an annual Form 990.
Step 6: Register your small business in New Jersey
Starting a new small business in New Jersey requires you to choose a registered agent, file a certificate of formation (also called a certificate of incorporation) and pay the state filing fee. The best and fastest way to do this is online through the official site of the State of New Jersey. The filing fee for business formation (LLC or corporation) online is $125, or $75 for nonprofit organizations.
What is a registered agent?
A registered agent is a person or company that is designated to receive legal correspondence on behalf of your business, such as lawsuits, subpoenas or government notices. A registered agent must be located in the same state as your business and have a physical address where they can be reached during regular business hours (P.O. boxes aren't accepted). A registered agent must also forward any legal correspondence to your business in a timely manner.
What are articles of organization?
Articles of organization, a certificate of formation or articles of incorporation all refer to the same legal documents that officially create an LLC or other entity type. These documents provide evidence that your business exists and contain all the essential business information. To register your business, you must submit these documents during your application.
Your certificate of formation needs to include certain specific information that will be reviewed for approval. This information includes:
The business name and physical address
The name and physical address of the registered agent
The names and physical addresses of all owners and managers
A statement explaining the purpose of the business and its mission
Entrepreneurs learning how to start a business in New Jersey can file their certificate of formation through the official site of the State of New Jersey.
Step 7: Apply for an Employer Identification Number (EIN)
The IRS issues a nine-digit number to registered businesses and organizations for tax purposes. This number is called a Federal Employer Identification Number (EIN) and it is required for all businesses in New Jersey that have employees or file a federal tax return.
Getting an EIN for your business comes with several advantages. You can protect your privacy by using your EIN instead of your Social Security Number (SSN), you can use it to get business loans or open a business bank account or credit card account and you can legally employ people to help you run the various aspects and operations of your business.
You can get an EIN online by filling out an application on the IRS website. Getting an EIN online is fast and easy, and you’ll get your EIN right away after you submit your application. Once you have your EIN, you’ll need to use it on all of your business tax forms and other official documents.
Step 8: Open your small business bank account
Opening a business bank account in New Jersey can help you handle your business finances more effectively and professionally. By keeping your personal and business finances apart, you can monitor your income, expenses and taxes far more easily and potentially avoid potential tax problems.
Business bank accounts are also a great way to build business credit (which is very helpful when you need to get business loans) and access online banking services to simplify your day-to-day financial processes. To open a business bank account in New Jersey, you should compare a variety of banks to find one that meets all of your needs. Look for low or no fees, useful features and a place nearby to your business for easy access.
Step 9: Obtain your business licenses and permits
New Jersey doesn't have a business license requirement at a state level, but your business must complete a Business Registration Application (Form NJ-REG) with the New Jersey Division of Revenue and Enterprise Services (DORES) at least 15 business days before doing business in the state. Then you'll be able to register for a New Jersey Business Registration Certificate and a Certificate of Authority online using your state business ID number and your EIN.
Local and municipal business licenses may be required to operate in your community, and you can find more information by visiting the webpage for your specific city or town. Depending on your line of business, you may also need to check the official New Jersey website for other specific licenses and permits. If you aren't sure what you need, a bit of research pays off and will enable you to confirm your permit and license requirements.
Step 10: Understand your New Jersey business taxes
Registered businesses in the state of New Jersey are required to pay various taxes — both state taxes and federal — when applicable. Here's what you should keep in mind when understanding tax obligations for your New Jersey business:
Sales and use tax
Businesses that sell products, as well as some specific services, must collect the New Jersey sales tax at the time of purchase. New Jersey's sales tax rate is 6.625%. Use tax is also 6.25% and applies to businesses that purchase products that are sold in another state by a vendor who doesn't charge the New Jersey state sales tax. Any owed use tax is paid to the NJ Treasury, Division of Taxation.
New Jersey corporation business tax
New Jersey charges a tax for the privilege of doing business in the state, but this only applies to S corps and C corps — LLCs are exempt. The rates depend on the type of corporation, its income, level and other factors. It's worth speaking to a professional tax accountant to determine the amount you'll need to pay if this tax applies to your business.
Corporate income tax
New Jersey’s corporate tax rate is 11.5%. That may sound steep compared to other states, but the rate will drop to 9% in 2024 as a temporary 2.5% rate hike is scheduled to sunset. This rate is in addition to the 21% federal corporate tax rate. Also, if you have a registered corporation, you are required to file your New Jersey corporate income tax returns every year, whether your business has earned income or not and even if your business doesn't owe any taxes.
It's up to you to ensure that you are meeting all tax obligations for your LLC or other entity type, which is why it's highly advisable to review the information provided by the NJ Treasury, Division of Taxation, and consult a licensed tax professional.
What is a DBA?
In New Jersey, a DBA (Doing Business As), sometimes called a fictitious name, assumed name or alternate name, is a name that a business can use instead of its registered legal name. It isn’t a separate legal entity from the business, but the business must register its legal name and its DBA with the state to use it.
Registering a DBA or alternate name can provide several benefits. You might use a DBA to create a brand that’s more catchy or memorable than the legal name you’ve chosen, if you plan to expand its services over time or if the purpose of the business changes. An example might be “Garden State Landscaping Services LLC”, which uses “Garden State Residential Lawncare” as a DBA to appeal to a more specific market.
Frequently asked questions (FAQs)
What are the requirements to start a business in New Jersey?
To start a business in New Jersey, you need to choose and register a name and a business entity, file a certificate of formation and pay the filing fee, obtain an EIN and apply for any required licenses and permits.
How much does it cost to open a company in NJ?
The initial costs of opening a company in NJ are $125 for filing a certificate of formation, plus any fees for reserving a name ($50), obtaining an EIN (free), registering for taxes and getting local and industry-specific licenses and permits. That said, you'll also need startup capital to launch your business and serve your customers, the cost of which depends on what your business offers.
Do I need a business license if I have an LLC in NJ?
New Jersey does not have a general business license for LLCs, but you may need a state or local license or permit depending on your business type and location. You can search for required licenses and permits online to find out what you need.
How do I start a self-employed business in NJ?
To start a self-employed business in NJ, you can operate as a sole proprietorship, which is a simple and common type of business that you own and run yourself. You don’t have to file any special forms or pay any fees to start your business, but you are personally liable for your business debts and taxes.
How do I start a business in New Jersey with little to no money?
To start a business in New Jersey without a lot of cash on hand, you need to find a free or low-cost business idea (such as offering digital freelance services), write a business plan, choose a business name, launch a website, and if necessary, source funding to grow your business. You can start a sole proprietorship or partnership without paying any filing fees, so that may be a good place to start.
What documents are needed to start a business in NJ?
To start a business in NJ, you'll need a business plan, a certificate of formation, an EIN, a completed Form NJ-REG and any documents pertaining to your business name.
What are the requirements to register a company in NJ?
To register a company in the state of New Jersey, you'll need to pick a business name, choose a registered agent, file your certificate of formation and pay the filing fee, apply for an EIN from the IRS and obtain any necessary licenses or permits.
How do I get a business license in NJ?
Business licenses are obtained at the local level, not the state level. However, New Jersey does require all businesses to register with the state to do business within the state. You can visit your local municipality's website for information on obtaining a local business license.
What are the benefits of starting a business in NJ?
Starting a business in NJ can give you access to a large and diverse market, a highly educated and skilled workforce, various tax benefits, flexibility and freedom in choosing your business entity and tax structure, as well as support and guidance from various state and local sources.
Ready to partner with a company that makes every day work better?
Like strolling along The Jersey Shore, building a small business should be an exciting and memorable journey. Understanding the intricacies of starting a business will bring you peace of mind, making it easier to think clearly and strategically about how you’ll ensure your company stands the test of time.
Looking for more support on your journey to become a business owner in The Garden State? We’ve got a resource for dreamers and go getters who want to to avoid common pitfalls and make something great. The Start-Up Path for Entrepreneurs is a free course, jam-packed with interesting content about how to start and grow a business, including interactive worksheets, planning tools and advice from real entrepreneurs who have been in your shoes.
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Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at heartland.us