Starting a Business NJ

Starting a Business

There are four main types of Business Organization: 1. Sole Proprietorship 2. Partnership * A. General Partnership * B. Limited Partnership 3. Corporation 4. Limited Liability Companies ADVANTAGES AND DISADVANTAGES OF BUSINESS ORGANIZATIONS Sole Proprietorship Advantages 1. Low start-up costs 2. Greatest freedom from regulations 3. Owner in direct control and asset ownership 4. Single level of taxation and both federal and state levels of taxation 5. Profits belong to owner 6. Reduced levels of annual reporting Disadvantages 1. Unlimited liability 2. Lack of continuity 3. More difficult to raise capital 4. Limits in tax deductions of medical and group life insurance Partnership Advantages 1. Ease in formation 2. Low start-up costs 3. Additional sources of capital 4. Broader management base Disadvantages 1. Unlimited personal liability 2. Lack of continuity 3. Divided authority 4. Hard to find suitable partners Corporation Advantages 1. Limited liability 2. Ownership is transferable 3. Continuous existence 4. Legal entity Disadvantages 1. Closely regulated 2. Most expensive to organize 3. Difficult to liquidate investment Corporation Advantages 1. Tax deferral @ l5% for first $50,000 of income 2. Medical Insurance is deductible 3. Group term life insurance is deductible Disadvantages 1. Maximum tax rate is 34% 2. Double taxation 3. Favorable liquidation tax treatment is no longer available resulting in double taxation. S Corporation Advantages 1. Single level of federal taxation 2. Single level of taxation upon sale or liquidation of business Disadvantages 1. Medical and group term life insurance is not deductible Limited Liability Companies An LLC is a new, non-corporate entity combining the operational flexibility and tax status of partnerships with the limited liability protection traditionally associated with corporations. Profit and non-profit activities may be pursued through LLC's. Generally, in New Jersey as well as other states that have adopted LLC legislation, an LLC expressly constitutes a separate and distinct legal person. The basic components which are derived from both corporate and partnership laws, are as follows: * Articles of Organization * Management * Operating Agreement * Limited Liability * Membership * Limited Life DOCUMENTS YOU MAY NEED 1. Prepare/Review lease agreements or purchase agreements 2. Prepare/Review franchise agreements 3. Prepare/Review buy-sell agreements 4. Obtain licenses, zoning variances 5. Provide specific legal advice 6. Prepare/Review and File Certificate of Incorporation and establish Registered Agent 7. Prepare/Review By-Laws 8. Prepare/Review initial meeting of shareholders documents 9. Prepare/Review and File Trade Name Certificate 10. Prepare/Review Partnership Agreement 11. Prepare/Review Agreement of Sale 12. Prepare/Review Promissory Note 13. Prepare/Review and File Annual Report 14. Suggestions on workers' compensation coverage IS THE CORPORATE STATUS UP TO DATE? IS THE CORPORATE STATUS UP TO DATE? 1. Is the minute book up to date? 2. Are the minutes signed? 3. Do the minutes reflect the following? * a. Annual shareholder's' meeting? * b. Annual directors' meeting? * c. Special meetings? * d. Retirement plan contributions? * e. Bonuses? 4. Are stock certificate books properly up to date? 5. Are by-laws properly up to date? 6. Are proper records of expense reimbursements being kept? You should have your accountant contact your attorney to be certain these and the following questions are taken care of: 1. Has corporate tax been estimated? 2. Have deposits on federal and state taxes been paid? 3. Are there any earnings accumulation problems? 4. Have state and federal tax returns been prepared? 5. Have all tax returns been filed on time? 6. Should a subchapter S election be made or recorded? 7. Are proper depreciation guidelines being followed?

more info at http://www.njlaws.com/starting_your_own_business.htm