How to Form an S Corporation in New Jersey

Introduction

An S corporation is a small business that provides its shareholders with limited liability and the pass-through tax benefits of a partnership or sole proprietorship. Forming an S corporation in New Jersey requires complying with several state rules, including those for incorporating and maintaining the corporation’s formal structure. The following steps will help you form an S corporation in New Jersey:

Choose an S Corporation Name

You will need to choose a name for your S corporation that is different from other S corporation names in the state. The name must be in either of these formats:

• [Corporation], [Inc.], or [Limited].
• Corp., Inc., or Ltd. (do not use the word “company” or any variation).

The following terms and abbreviations are not allowed: Company, Corp., Co., Inc., Incorporated and Limited. Your corporation’s name cannot include a geographic location unless that location is part of your state’s official name (for example, Corporation of New Jersey).

Choose a Registered Agent

The registered agent is the person who receives service of process on behalf of your business. It’s important for your New Jersey S corporation to have a New Jersey resident as its registered agent because the state of incorporation must have personal jurisdiction over this person in order for them to handle legal issues that may arise.

The registered agent should be available during normal business hours, so if you plan to run your company from home during off-hours, make sure you have someone who can manage communications with customers and suppliers while they’re not around. They also need to have an easily identifiable physical address in New Jersey available as part of their duties as a registered agent so that any legal documents sent via mail can be delivered properly.

File Articles of Incorporation

The first step to forming an S corporation is filing Articles of Incorporation. These are filed with the state where you want to do business, and they provide essential information about your company. The secretary of state will review your articles for completeness before you can move on to other steps.

The articles must include:

• Your business name and address
• The name and address of each shareholder (owner)
• The number of shares that each owner holds in the company

Create an S Corporation Agreement

In addition to the Articles of Incorporation and the tax returns, you’ll need a written agreement between shareholders. The agreement should include provisions for:

• What percentage each shareholder owns.
• How they plan to share profits and losses. (This may be as simple as allocating all net income or loss equally.)
• How they will handle major business decisions. (Do they want to vote together? Will their votes equal one vote per person? Do two shareholders have more voting power than other owners?)

You must also have a written agreement between shareholders and managers if your company has managers who aren’t also owners. This document should address issues like: how much money is allocated for management salaries; what happens when an employee leaves; what type of benefits are provided (if any); if there are any performance reviews; whether employees can be terminated at will or only with cause; which party bears responsibility for managing specific aspects of the firm’s operations; etc., etc., etc…

Comply With New Jersey’s Other Requirements

In addition to the requirements for formation, you should also be aware of New Jersey’s other requirements for S corporations. For example, you must:

• File annual reports with the New Jersey Department of State
• Open and maintain a bank account in a name that matches your business name (e.g., ABC LLC)
• Keep financial statements on file at all times

Takeaway:

If you have a small business you run, an S corporation may be the right choice for you. S corporations are great if you want to retain control of your company and avoid double taxation. The process is relatively straightforward and easy to complete, but if there’s one thing we can learn from this article, it’s that there are many things to consider before deciding on an S Corp status.

Conclusion

If you’re interested in forming an S corporation in New Jersey, we hope this article has been helpful. We are happy to answer any questions and provide assistance throughout the process.