It’s easier than ever to get the resources necessary to start your own business, thanks to the prevalence of online platforms and information for entrepreneurs. But before you fully transform your idea into a real business, you’ll need to structure it and get the right ID numbers in place. New Jersey is a small state, but has a respectable population. There are more than 861,000 small businesses in the state, which represent 99.6 percent of all New Jersey businesses. Together, they employ nearly half of New Jersey’s working population, with 1.8 million total employees. Small businesses in New Jersey are responsible for much of the state’s recent economic growth; in fact, small businesses alone added more than 33,000 net new jobs in the state in 2018.
Steps to Obtaining a Tax ID (EIN) Number and Registering a New Jersey Business
- Forming a Business in New Jersey
- Federal Tax ID (EIN) Number Obtainment
- New Jersey State Tax ID Number
- Localized Licenses and Permits in New Jersey
When you’re ready to start a business, you’ll need to consider the best business structure for your idea. There are four main types of structures to choose from, including sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. Learn about each business type’s advantages and disadvantages:
- Sole proprietorships. Sole proprietorships are favored by first-time entrepreneurs starting a small business with little intention of growth. They’re simple and straightforward to start and manage, and taxes work in a convenient, easy-to-understand way; you’ll simply pay taxes on any income you make in the business as an individual. The big downside with these business types is that you’ll have much more liability exposure, which can be problematic if you take on personal debt or face legal issues.
- Partnerships. Partnerships are practically identical to sole proprietorships, except they involve more than one person. You’ll split any expenses and revenue, paying taxes as individuals, and will face liability as individuals as well.
- Limited liability companies (LLCs). LLCs are a little trickier to set up and manage, but they’re not out of the realm of possibility for new entrepreneurs. Their biggest advantage is that they’re treated as separate legal entities, which means they can take on debts and legal responsibilities of their own; this affords LLC members with a significant degree of liability protection. They’re also considered pass-through entities for tax purposes. This means LLCs won’t pay taxes on revenue generated in the business, but you’ll pay taxes as an individual on any money you withdraw from the business as salary or profits. In New Jersey, LLCs are required to file an annual report.
- Corporations. Corporations are much more complicated, but have a key advantage; they offer the ability for companies to raise capital by issuing public shares. These are considered separate legal entities like LLCs, and afford their owners significant liability protection. The only downside to corporations is that they face a double taxation scenario; corporations are taxed on any eligible revenue they generate, and owners are taxed on money they make as salary or profits. In New Jersey specifically, corporations are taxed a variable rate, with a rate of 6.5 percent for income up to $50,000, 7.5 percent for income between $50,000 and $100,000, and 9 percent for income in excess of $100,000 in a given year. There is also a minimum tax.
Put some serious thought and research into this decision. You can change your business structure in time, but it’s better to start with the most advantageous structure for your model.
Most New Jersey businesses will need to have a federal tax ID for their business. This is a 9-digit, unique identifying number that’s assigned to businesses when they register with the federal government. It’s also known as an employer identification number, or EIN. You’ll need this number if your business has multiple members, or if your business plans on hiring employees. You’ll also need one if you’re opening a business bank account, applying for loans, or applying for licenses and permits.
You’ll want to get a tax ID as soon as possible so you can start making money in your business. The best way to do this is to utilize our federal tax ID number obtainment services. With us, you’ll simply need to fill out an online questionnaire, answering questions about your business. Within an hour, you’ll receive your tax ID via email.
Your business may also need a New Jersey state tax ID number. This is a unique identifying number, like your federal tax ID number, but it applies at the state level and is used for different purposes. You’ll need a New Jersey state tax ID number if you’re going to hire employees in the state, if you’re selling taxable goods and/or services in New Jersey, or if you’re going to owe excise taxes, which apply to regulated goods like gasoline, alcohol, or tobacco. Many businesses will need both a federal and state-level tax ID.
You’ll need a federal tax ID number before getting your New Jersey state tax ID number. Once you have that, you can make use of our New Jersey state tax ID number obtainment services; simply answer a few questions about your business, and you’ll get your New Jersey state tax ID number in 4 to 6 weeks.
Some businesses will need to have additional documents before they can begin their business, such as licenses, permits, or certifications. These licenses and permits will vary based on both your industry and your local city and county regulations, so it’s impossible to make a comprehensive list of the permits or licenses you may need. The best thing to do is visit your local Chamber of Commerce, where you can learn specifically which permits or licenses you may need.
The number of entrepreneurs in New Jersey is increasing. The most recent year represented entrepreneurial growth of 2.7 percent. Professional, scientific, and technical services are heavily represented in the state, as are healthcare and social assistance companies. Small business employment tends to be concentrated in urban areas, but there are plenty of suburban and rural opportunities for business development as well.
Starting a business requires you to jump through some legal and formal hurdles, but they shouldn’t be too hard to overcome. Start by using our federal tax ID number and New Jersey state tax ID number obtainment services to get your tax IDs as quickly as possible, and start generating revenue for your business faster.