How to Form a S Corporation in New Jersey

 

In New Jersey, you may incorporate a S corporation (S corp) by founding a limited liability company (LLC) or a corporation and then choosing S corp status from the IRS when applying for your EIN.

An S corporation is a tax categorization, not a company structure, according to the IRS. The S corp classification is used to lower a company’s tax burden.

In our How to Start a S Corp in New Jersey tutorial, we’ll walk you through the steps.

Considerations Before Forming a S Corp

You must examine the following things before founding a S corporation:

Is a S corporation the best option for your company?
S corporation limitations
Why is an LLC the ideal structure for the S corporation tax status?
Are the tax benefits of a S corporation good for you?

Is a S Corporation the Best Business Structure for You?

Restrictions on S Corporations

S corporations are restricted to one class of stock and 100 stockholders, among other things. For more information, see our What Is a S Corporation? guide.

Why is an LLC the best structure for S Corporation tax status?

As entrepreneurs, we feel that incorporating a S corporation via an LLC is the best option since the benefits of founding a corporation are offset by S corp limitations. LLCs are also less difficult to manage than corporations.

Are S Corporation Tax Benefits Right for You?

You must determine if the S corp tax status is preferable to the default LLC tax status for your company. Read our LLC vs. S corp tutorial to fully grasp the tax benefits of a S corp.

How to Form a S Corporation

There are two major methods to form a S corporation:

When requesting your employee identification number, organize an LLC and obtain S corp tax status from the IRS (EIN)
By creating a company and applying to the IRS for S corp status

We do not advocate forming a company with the S corp tax status since it undermines all of the advantages of forming a corporation.

Forming an LLC and Choosing S Corp Status in New Jersey

To form an LLC and elect S corp status, follow these six simple steps:

Step 1: Give Your LLC a Name

Step 2: Select a Registered Agent.

Step 3: Submit your Certificate of Formation.

Step 4: Apply for a State Tax Identification Number.

Create an Operating Agreement in Step 5

Step 6: Obtain an EIN and complete Form 2553 to elect S Corporation Tax Status.

Step 1: Give Your LLC a Name

The first and most significant step in forming an LLC in New Jersey is deciding on a name.

Make certain that the name you chose conforms with New Jersey naming rules and is readily searched by prospective customers.

1. Follow the New Jersey LLC naming guidelines:

The word “limited liability corporation” or one of its acronyms must be in your name (LLC or L.L.C.). “Limited” may be shortened to “Ltd.,” while “business” can be shortened to “Co.”
Your LLC’s name cannot include terms that may be confused with a government organization (FBI, Treasury, State Department, etc.).
Bank, banker, banking, blind, cemetery, citius, con-con, dba, e-com, express mail, handicapped, little league, mail, olympiad, olympia, olympian, altius fortius, olympic, olympus, realtor, trust, United States Olympic Committee, urban renewal insurance, zip code, and USPS need clearance.
Your name must be distinct from any other current company in the state. This lists reserved names in New Jersey.

2. Does the name exist in New Jersey? To discover whether your selected LLC name is available, utilize the company name availability search on the New Jersey Division of Revenue and Enterprise Services website.

3. Is the URL accessible?

We suggest that you check to see whether your company’s name is accessible as a web domain. Even if you don’t intend to construct a company website right away, you may want to purchase the URL to prevent others from gaining it.

Step 2: Select a New Jersey Registered Agent

Your New Jersey LLC must have a registered agent.

A registered agent for your LLC will accept legal papers and tax notifications on your behalf. When you submit your LLC’s Certificate of Formation, you will name your registered agent.

Many company owners opt to use the services of a registered agent. Many of these firms will incorporate your LLC for a modest price and provide free registered agent services for the first year.

Step 3: Fill out the New Jersey LLC Formation Certificate.

The Certificate of Formation in New Jersey is used to properly register an LLC.

Step 4: Apply for a State Tax Identification Number.

You must register with the New Jersey Division of Revenue and Enterprise Services for business and entity tax filings within 60 days of founding your LLC. You may do this either by mail or online.

Step 5: Draft an Operating Agreement for your LLC.

An LLC operating agreement is a legal document that defines your LLC’s ownership and member responsibilities.

Step 6: Apply for an EIN and fill out Form 2553 on the IRS website.

An EIN is a number assigned by the US Internal Revenue Service (IRS) to companies in order to identify and tax them. It is basically a business’s Social Security number.

When you apply directly with the IRS, EINs are free.

Select S Corporation Tax Status
The IRS will give a link to Form 2553, the Election by a Small Business form, during the online EIN application process.