New Jersey Business Formation
Provided by our New Jersey Business Lawyer, Mark S. Guralnick
If you wish to form a business enterprise, you should consult a New Jersey business lawyer, and perhaps your accountant and insurance broker. There are many considerations depending upon the kind of business formation, and the number of people you intend to have as partners or co-owners. If you need assistance with this process, please feel free to call the Law Offices of Mark S. Guralnick at 1-866-337-2900.
Every state recognizes corporations. To form a corporation, it is generally necessary to file Articles of Incorporation. This document is also sometimes referred to as a Certificate of Incorporation. Generally, this document is filed with the Secretary of State office, but may be filed with a commercial recording division or a clerk’s office in your state. There is generally a filing fee. In order to form a corporation, you will need at least one shareholder. Your state may require you to identify officers or directors of the corporation as well. The person who signs the Articles of Incorporation is generally known as the incorporator. Most places also require that you identify a resident agent. The resident agent also provides a resident address. The resident agent is the person situated in your state that can be contacted or served with legal papers in the event that your corporation is sued. It is also the person to whom tax papers, government notices and other official papers would be directed.
Historically, corporations were seen as useful devices to insulate a person’s individual assets. Because a corporation exists separately from its individual owners, it has the right to sue or be sued in its own name. A corporation lives on even after its owners die. A corporation is technically owned by its shareholders. One person can own all of the shares of the corporation and, in essence, be a one-man corporation. Other corporations can be owned by hundreds or thousands of stockholders. Small, closely-held, or family-run businesses usually involve one or two or a handful of shareholders. They are considered private corporations in the sense that nobody can buy shares of stock unless any of the owners wishes to sell his interest to another person. A corporation, however, can go public by going through a formal procedure to list its shares on the stock exchange. Undergoing this procedure subjects a corporation to the regulations of the Securities and Exchange Commission (SEC), and involves many technical formalities. Once a corporation is publicly listed on a stock exchange, there may be many owners of the corporation who don’t even know each other. Stock can then be bought and sold and traded on a regular basis through stockbrokers and other financial advisors.
An alternative to a corporation is a partnership. A partnership can come into existence without any formality. If two people start doing business together, they may be treated as business partners, and they may be subject to partnership laws and liabilities. Some states have a formal procedure for registering partnerships; in other states, the partners themselves establish contracts, agreements, bylaws and other documents to set forth the terms of their partnership. Like a corporation, a partnership may do business using a company name. However, unlike a corporation, a partnership is not a separate entity. Partners are generally sued in their own names, and they are taxed as individuals. (With a corporation, the corporation itself is taxed at a corporate income tax rate, and its individual owners, of course, pay their own personal income tax).
A variation of a general partnership is a limited partnership, in which a general partner or managing partner runs the business but one or more participants function as limited partners. Such limited partners may contribute capital to the enterprise, but they are generally not involved in the day-to-day operation of a business. Their exposure and liability is limited, generally to the extent of their contribution.
A popular alternative to conventional corporations and partnerships is the limited liability company. This is known by various names across the country such as limited liability corporation, limited liability company and limited liability partnership. In most instances, the limited liability company is a hybrid of the corporation and the partnership. It provides the kind of protection and insulation that a corporation provides, preventing creditors from reaching individual assets when they are suing the company. On the other hand, the owners of a limited liability company are treated as individuals or as individual partners for tax purposes. Limited liability company laws are still developing and evolving in many places, and you would be wise to consult the local statutes for the peculiarities of this form of business entity.
You may notice that doctors, lawyers, dentists, architects, accountants and other licensed professionals often identify their firms with the initials P.C. or P.A. These initials generally refer to professional corporation (P.C.) or profession association (P.A.). These are forms of corporations used by licensed professionals to protect their business enterprises. Professional corporations and professional associations are essentially corporations, but they require that all owners carry the same professional license. Thus, a law firm that contains the initials P.C. in its name generally requires that all shareholders in the firm are licensed to practice law in the state.
If you wish to form a business enterprise, you should consult your New Jersey business attorney at our firm. Mark S. Guralnick has years of experience as a New Jersey business lawyer and can help you’re your business formation. There are many considerations depending upon the kind of business you are forming, and the number of people you intend to have as partners or co-owners. To learn more about business formation, contact our New Jersey business attorney today.