How to profit by forming your own limited liability company

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Filing Form NJ-REG ensures that your business is registered under the correct tax identification number and that you will receive the proper returns and notices. A business with employees must obtain a FEIN. If you do not have a federal identification number for your business, you may apply for one as you fill out the online NJ-REG or you may apply directly to the IRS online.

The NJ-REG, however, must be filed within 60 days of filing the new business entity if the registrations are submitted separately.

If you choose not to register online, you may download the paper forms and instructions, which are found in the Business Registration Packet. If you want assistance in checking the availability of a business name, you may call the Division at Fees apply for this service.

Disadvantages

A business formed outside of New Jersey must use the exact name that is on the formation document in its home state. If that name is already being used by another business entity in this state, the foreign business will need to establish a secondary or 'doing business as" name for New Jersey purposes. Only foreign non-New Jersey businesses may use a "dba" name. When a "dba" is designated, online registration is not available. Name Availability Check and Name Reservation Services You may check on the availability of a business name by calling the Division at A corporate structure has many benefits when it comes to legal protections for owners, but it requires rigorous reporting mechanisms.

The company board is responsible for issuing stocks, handling corporate meetings, recording the time of meetings, electing directors, and conducting business by resolution.

How to profit by forming your own limited liability company

For example, a founder may become CEO and chairman of the board for a corporation but must have other board members now involved in the guidance of the company. A corporation will typically offer more personal liability from debts or lawsuits than an LLC might. It is a separate taxpaying entity, which means that a corporation is responsible for paying corporate income taxes on its earnings and is responsible for its own debts.

Essentially, a corporation stands alone and wholly separate from its founders. Corporations are more complicated and less flexible than an LLC, but can also be more protective and be viewed as more robust and professional. Related : Omaha Startup Press for There are several benefits than an LLC provides its members.


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Some of these benefits are described in more detail below. Firstly, an LLC offers members the option of forming a legitimate business, without all of the paperwork that is required for a corporation. An LLC offers limited liability, similar to the way that corporations do; however, corporations require far more documentation. Part of the paperwork reduction that LLCs enjoy, in contrast to corporations, is the record-keeping of annual reports.

Corporations must typically make annual reports and have a substantial amount of recordkeeping requirements. LLCs, on the other hand, do not have to keep extensive records or file any annual reports. LLCs also do not have to keep records of annual meetings and do not require minute books the way that corporations do. One of the greatest advantages to an LLC is that they offer a good number of tax advantages. First of all, the business itself is not responsible for taxes on company profits.


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Traditional corporations, on the other hand, are taxed twice on distributions to shareholders, both corporately and individually. This is because the LLC is divided from its members into legal terms. An LLC is able to limit your personal liability in the case in which you, an employee, or a business partner is accused of negligence; your own personal assets cannot typically be touched in such circumstances. In the case of traditional partnerships, your personal debts and your business-related debts are ultimately the same. An LLC is able to protect your personal assets within your business to create limited personal liability for all members.

Another great benefit that LLCs offer is member flexibility. There is no limit on the number of members that a Limited Liability Company is able to have, and additional members are able to purchase equity within the company. Not only do LLCs offer pass-through taxation, but they are able to do so without restricting the number or even the type of members that a specific LLC may have.

For some, sharing in the loss of a company can actually be beneficial to reducing their personal tax liability.

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Why You Should Turn Your Sole Proprietorship into an LLC

Typical corporations are structured in a hierarchical way. This is not the case for Limited Liability Companies, however. In LLCs, the members are able to have greater flexibility in the way that they make decisions and in the way that their business is run overall. An LLC is typically a much more efficient structure to use for a small business or startup. In Limited Liability Companies, it is not required for members to distribute company profits equally, or through specific ownership percentages.

If a certain member contributes more time, labor and money for the company, then he or she is able to receive a larger profit share. In the case of a corporation, company profits must be shared equally depending on the types and the number of shares that each member holds. The flexibility that LLCs offer in the way that profits are distributed through members makes it a desirable company structure for many.


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One important application here is the separation of ownership and profit distributions. One LLC member may own a controlling share of the company, but another may receive a majority of the profits.

LLC vs. Inc. - Differences & Benefits | BizFilings

This type of structure can allow startup founders to retain control of a company while giving investors rights to larger portions of the profit distributions. Similar to LLCs, corporations are able to provide their shareholders with limited liability protection. The shareholders of a corporation are able to protect their personal assets because the business is a separate entity.

Forming a corporation also comes with having tax advantages, though these advantages are different from an LLC. Tax advantages for corporations include self-employment tax savings and the deductibility of expenses such as health insurance and life insurance. If you want to know more about the specific tax-related benefits that come with forming a corporation, please consult a tax advisor or an accountant in your state. These advantages can vary by state, and there are a handful of states that present very attractive tax environments for corporations.

California, New York, and New Jersey are often considered some of the worst states for corporations. A corporation will not cease to exist if a business owner leaves the company, or passes away. A corporation will continue to exist and continue to do business, regardless of what happens to shareholders, managers, officers, of individual corporate directors. Corporations are known to be the most enduring legal business structure, as they continue to exist perpetually. This is a great benefit when it comes to avoiding any potential legal entanglements, that can prove to be troublesome within other types of businesses.

For startups founders, this can be seen favorably by outside investors who to be sure the company can continue even if the founder were to leave. It is easier to establish retirement plans and retirement funds such as K for corporations than it is for other business structures. It is important to know, however, that the taxation for corporations is generally quite complex, as different corporations will offer different tax advantages.

The benefits that corporations are able to provide in terms of retirement plans may not be of the highest priority for certain businesses, for example.

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