How to Form a Professional Corporation in New Jersey


Steve Goldstein
Steve Goldstein
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Form a Professional Corporation in New Jersey

Are you considering starting a professional corporation in New Jersey? Congratulations! Establishing a professional corporation is an excellent choice for entrepreneurs and professionals alike who seek to benefit from a business structure that provides limited liability protection, tax advantages, and enhanced credibility. However, navigating the process of forming a professional corporation in New Jersey can be daunting.

This article aims to provide a comprehensive guide on how to form a professional corporation in New Jersey, covering everything from understanding the basics of this business entity to the essential steps and requirements you must comply with to launch your new venture successfully. Let’s dive in and explore the ins and outs of forming a professional corporation in New Jersey!

What is a Professional Corporation in New Jersey?

A professional service corporation (PSC), sometimes called a professional corporation (abbreviated as PC), is a type of organization authorized by state law to allow owners of particularly licensed professions in New Jersey. The owner of a professional corporation is responsible for their own negligence or misconduct, but they are not held personally accountable for the actions of other owners. PC or P.C. is a regularly used abbreviation to identify professional corporations.

PCs and LLCs provide personal asset protection; that is, the personal assets are free from business debts. However, they do not have similar tax benefits. There is no secret formula as to which type of business structure is better than the other. It solely depends on the requirements of your business. However, forming an LLC is easier than setting up a PC in New Jersey.

LLCBuddy Editorial Team

Unlike other types of corporations, owners of Professional Corporations get two types of citizenship. One is where they incorporated the corporation, and the other is where they conduct the business. This benefit is not available for other types of corporations. You can form a free LLC in New Jersey if you hire a professional service that provides LLC formation at $0.

How to Form a Professional Corporation in New Jersey

To form a Professional Corporation for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Registered Agent, filing the Certificate of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in New Jersey, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

  • Doctors
  • Architects
  • Engineers
  • Accountants
  • Lawyers and others

You should be qualified to have a license to provide your service. In most cases, once you have graduated with your studies, passed the exam, and got your license, you may now form a professional corporation. However, if you work in an industry that doesn’t offer a license or professional certification, you should consider forming a corporation or limited liability company.

Step 2: Name your Professional Corporation in New Jersey

After you have decided on the idea to form a professional corporation in New Jersey, deciding the name for your corporation is significant. There is a complete guide on New Jersey LLC name guidelines for you to have a proper business name. Here are some regulations you must follow while naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • No confusion with a government entity name.
  • A unique name is needed with no match
  • Limit of restricted words that need a license.

In New Jersey, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 120 days. To keep the name, you must file a name reservation application with New Jersey Secretary of State.

A professional corporation, professional association, service corporation, or professional service corporation must be present in the name if it doesn’t already. You might opt to register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire to run a clinic or law firm.

Step 3: Choose the New Jersey Registered Agent

The next step in forming a professional corporation is hiring the New Jersey Registered Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in New Jersey. Forming a professional corporation for your service will be easier if you have Registered Agent in New Jersey.

Alternatively, you can serve as your own New Jersey Registered Agent if you have the time. However, you must stay compliant to avoid missing any important documents from New Jersey.

Step 4: File the Certificate of Incorporation in New Jersey

After you hire a New Jersey Registered Agent to form a professional corporation, the next step is to file the New Jersey Certificate of Incorporation. In writing the Certificate of Incorporation, the business name, owner’s contact information, corporation address, and Registered Agent contact information should be written. You should also include the names of all co-owners. All owners have to prove they have the proper license to practice the specific profession they intend to.

Filing the Certificate of Incorporation in New Jersey may be done with four methods that are online, fax, by mail and in-person. The Certificate of Incorporation fee may vary from different states. However, in New Jersey, it costs $125 for filing online, by mail, or in person. Create an account/Log in to the SOS site, get the online form, fill it, and submit online. For offline filing, Send the form by mail or drop it off in person at New Jersey Division of Revenue, P.O. Box 308, Trenton, NJ 08646..

Step 5: Write an Operating Agreement in New Jersey

An operating agreement is a document that contains all of your company’s organizational details. It is not required to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The New Jersey operating agreement includes information like-

  1. About Business
  2. Members and management
  3. Capital contribution
  4. Profit Distribution
  5. Change of membership
  6. Dissolution

Step 6: Designate the PC Board of Directors in New Jersey

The next step is to appoint the initial board of directors in your PC in New Jersey. All the initial directors must submit their details to the owner. The owner must keep the records and submit them in accordance with the New Jersey SOS. When writing the By-laws, as a shareholder and owner, you must make sure there is a point mentioned about appointing a new director later.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made.

  • The responsibilities are given to each officer.
  • How will judgments in business be made?
  • Where and when are the annual shareholder meetings?
  • The minimum number of shareholders required for decision-making.
  • Location and timing of dividend payments.

Step 8: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 9: Request an EIN in New Jersey

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in New Jersey can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your professional corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 10: Open a Bank Account and Prepare for Taxes

Once you have filed and received your Employer Identification Number, you should open a bank account since you will use this account for yourself, your clients, and your employees.

Your business dealings in New Jersey might be simpler by having a US business bank account because it boosts your company’s legitimacy and liquidity. For firms other than sole proprietorships, most banks demand an EIN to create a business bank account. Also, keeping separate finances helps you avoid combining personal and professional finances. Also, having an EIN makes tax preparation easier. With a professional corporation, you can anticipate paying employment and corporate taxes.

Step 11: Get a Business License in New Jersey

Before your professional corporation operates in New Jersey, you need to have a business license first. A business license is a formal document issued by the state government agency that allows you to operate your business in the geographic region that that agency governs. In New Jersey, business license and permit costs depend on the business’s nature and type. You must check with the local authorities if any special licenses or city-based permits are needed.

Step 12: File Your Taxes in New Jersey

Finally, you are down to the last step. After getting a business license and being ready to operate, do not forget to file your taxes first. You should start paying taxes quarterly as soon as possible to avoid a large tax bill. Each state has different tax requirements. Go through the New Jersey classification of taxes for the taxes an LLC in New Jersey has to pay.

Important Information

Maintaining Professional and Business License in New Jersey

Now that you have established your professional corporation, you must maintain or renew your professional license every now and then. Even if your business is established but you don’t have a valid license to operate, your business is irrelevant. And, even if your professional license is still valid for a year or two, but your business license is already expired, it is still irrelevant.

Make time to check the status of your licenses at least once per year. Then, you can keep from missing anything significant. If there are any issues, you can address them.

Filing an Annual Report in New Jersey

In New Jersey, you will be required to submit a report each year. The owners’ and Registered Agent’s names and contact details are listed in the annual report. Also, it should include all of your yearly financial activity. You must submit one yearly in New Jersey, and you can do it yourself or hire someone else to handle it. Everything must be precise and up to date.

Advantages of Forming a Professional Corporation in New Jersey

A professional corporation takes a lot of time to process and pursue. However, with the help of the New Jersey Registered Agent, everything will become easier. In fact, there are advantages that will help you form a professional corporation in New Jersey.

  1. Limited Liability: The biggest advantage of setting up a professional corporation is that the owners are not held personally responsible for the debts and obligations of the company. This indicates that only the company’s assets will be confiscated to settle claims and creditors if the business is sued or declares bankruptcy. Additionally, this protection exempts corporate owners from being held accountable for other owners’ reckless or criminally negligent acts.
  1. Tax Deductions: Similar company expenses, such as employee fringe benefits, startup and operating costs, and equipment purchases, can be written off by professional companies in the same ways they can be for other kinds of firms. However, there are several tax deductions professional corporations can take advantage of that other types of businesses can’t. For example, the salaries and bonuses paid to owners and employees are tax-deductible.
  1. Retained Earnings: Professional corporations can keep a portion of their profits under the corporate tax system to grow their companies.

FAQs

What are the requirements to form a Professional Corporation in New Jersey?
To form a Professional Corporation in New Jersey, the corporation must be organized for a lawful purpose and the shareholders must be licensed professionals. The business must also register with the New Jersey Division of Revenue.
Are there any restrictions on the types of professionals who can form a Professional Corporation in New Jersey?
In New Jersey, only certain licensed professions such as doctors, lawyers, dentists, engineers and accountants are eligible to form Professional Corporations.
What are the advantages of forming a Professional Corporation in New Jersey?
Forming a Professional Corporation in New Jersey can provide liability protection for the shareholders, a more flexible form of ownership, and the ability to deduct certain business expenses from taxable income.
What is the process for forming a Professional Corporation in New Jersey?
The process for forming a Professional Corporation in New Jersey involves filing the Certificate of Incorporation with the New Jersey Division of Revenue and then obtaining the business documents necessary to register the business.
What are the fees associated with forming a Professional Corporation in New Jersey?
The fees associated with forming a Professional Corporation in New Jersey vary depending on the type of business and the number of shareholders. The filing fee for the Certificate of Incorporation is $125, plus a $75 annual fee.
Are there any tax implications of forming a Professional Corporation in New Jersey?
Yes, forming a Professional Corporation in New Jersey can have tax implications. The corporation is subject to income tax and the shareholders may be subject to additional taxes such as self-employment tax.
What is the filing deadline for forming a Professional Corporation in New Jersey?
The filing deadline for forming a Professional Corporation in New Jersey is 30 days from the date the Certificate of Incorporation is filed.
Is there a minimum amount of capital required to form a Professional Corporation in New Jersey?
No, there is no minimum amount of capital required to form a Professional Corporation in New Jersey.
What is a Professional Corporation in New Jersey?
A professional corporation in New Jersey is a business entity formed by an individual or group of professionals, such as lawyers, doctors, or other licensed professionals, for the purpose of providing professional services.
What are the steps involved in forming a Professional Corporation in New Jersey?
The steps to forming a professional corporation in New Jersey include selecting a name, filing articles of incorporation with the New Jersey Division of Corporations, obtaining an Employer Identification Number, registering for state and local taxes, having the corporate bylaws drafted, and obtaining any necessary professional licenses.
What is required to maintain a Professional Corporation in New Jersey?
To maintain a professional corporation in New Jersey, you must file annual reports with the New Jersey Division of Corporations, pay franchise taxes, and hold annual shareholder meetings.
Is a Professional Corporation in New Jersey required to have a Board of Directors?
Yes, a professional corporation in New Jersey is required to have a Board of Directors, which is responsible for managing the business and making decisions on behalf of the corporation.
Are there any restrictions on Professional Corporations in New Jersey?
Yes, professional corporations in New Jersey are subject to certain restrictions, including restrictions on the types of services they can offer, the ownership of the corporation, and the number of shareholders.
Is it necessary to form a Professional Corporation in New Jersey?
Yes, any professional service provider in New Jersey must form a Professional Corporation in order to operate legally in the state.
What are the requirements for forming a Professional Corporation in New Jersey?
The requirements for forming a Professional Corporation in New Jersey include filing an Application for Authority with the New Jersey Division of Revenue, obtaining a Certificate of Authority from the New Jersey Department of the Treasury, and obtaining a Certificate of Incorporation from the New Jersey Secretary of State.
How much does it cost to form a Professional Corporation in New Jersey?
The cost to form a Professional Corporation in New Jersey is typically between $100 and $300, depending on the filing fees and other associated costs.
What are the benefits of forming a Professional Corporation in New Jersey?
The benefits of forming a Professional Corporation in New Jersey include protection from personal liability, tax savings, and increased credibility.
What documents are needed to form a Professional Corporation in New Jersey?
The documents needed to form a Professional Corporation in New Jersey include an Application for Authority, a Certificate of Authority, and a Certificate of Incorporation.
How long does it take to form a Professional Corporation in New Jersey?
It typically takes 4-6 weeks to form a Professional Corporation in New Jersey, depending on the filing fees and other associated costs.
Is it possible to form a Professional Corporation in New Jersey online?
Yes, it is possible to form a Professional Corporation in New Jersey online by filing an Application for Authority with the New Jersey Division of Revenue, obtaining a Certificate of Authority from the New Jersey Department of the Treasury, and obtaining a Certificate of Incorporation from the New Jersey Secretary of State.
What is the difference between a Professional Corporation and a regular Corporation in New Jersey?
The main difference between a Professional Corporation and a regular Corporation in New Jersey is that a Professional Corporation is specifically designed to provide professional services, while a regular Corporation is typically used to conduct business activities.
Can a Professional Corporation in New Jersey be owned by non-professionals?
Yes, a Professional Corporation in New Jersey can be owned by non-professionals, however, the owners of the corporation must be licensed professionals in order to provide professional services.
Can a Professional Corporation in New Jersey be owned by multiple professionals?
Yes, a Professional Corporation in New Jersey can be owned by multiple professionals, however, each owner must be licensed to provide the professional services offered by the corporation.
Do I need a lawyer to form a Professional Corporation in New Jersey?
While it is not required to hire a lawyer to form a Professional Corporation in New Jersey, it is recommended to seek legal advice before beginning the process.
What paperwork is required to maintain a Professional Corporation in New Jersey?
The paperwork required to maintain a Professional Corporation in New Jersey includes annual reports, federal and state tax returns, and payroll records.
Is it possible to dissolve a Professional Corporation in New Jersey?
Yes, it is possible to dissolve a Professional Corporation in New Jersey by filing a Certificate of Dissolution with the New Jersey Secretary of State.
Are there any specific requirements to dissolve a Professional Corporation in New Jersey?
Yes, the requirements to dissolve a Professional Corporation in New Jersey include giving notice of the dissolution to all owners and creditors, settling all outstanding debts and obligations, and filing a Certificate of Dissolution with the New Jersey Secretary of State.
Are there any special tax considerations when forming a Professional Corporation in New Jersey?
Yes, there are specific tax considerations when forming a Professional Corporation in New Jersey, including filing a separate business tax return and paying self-employment taxes.
Are there any restrictions on the type of professional services that can be provided by a Professional Corporation in New Jersey?
Yes, there are specific restrictions on the type of professional services that can be provided by a Professional Corporation in New Jersey, such as requiring certain professional qualifications, licensure, or certifications.
What are the reporting requirements for a Professional Corporation in New Jersey?
The reporting requirements for a Professional Corporation in New Jersey include filing annual reports, federal and state tax returns, and payroll records.
Are there any special benefits for a Professional Corporation in New Jersey?
Yes, a Professional Corporation in New Jersey may be eligible for certain tax benefits, such as reduced corporate tax rates and deductions for professional expenses.
What are the risks of forming a Professional Corporation in New Jersey?
The risks of forming a Professional Corporation in New Jersey include personal liability for the acts and omissions of the corporation, and potential criminal and civil penalties for failure to comply with state and federal laws.

Also Read

Why New Jersey Professional Corporation is So Important

One of the key reasons why New Jersey Professional Corporation is so important is because it offers personal liability protection to its owners. When a professional forms a P.C., they are able to separate their personal assets from the business, meaning that their personal savings, homes, and other assets are protected in case the corporation faces a lawsuit or bankruptcy. This protection is especially crucial for high-risk professions where any mistake or negligence could result in legal action. By creating a P.C., professionals can shield themselves from individual liability and safeguard their personal assets.

Another important aspect of New Jersey P.C.’s is the ability to raise capital and grow their businesses. Professionals who form a P.C. can sell shares to investors, allowing them to raise capital for expansion, equipment purchases, or hiring additional staff. This ability to access outside funding is a key differentiator for P.C.’s compared to sole proprietorships or partnerships that may struggle to attract external investments. By opening up new avenues for financing, New Jersey P.C.’s can thrive and reach new heights of success in their industries.

In addition to financial benefits, forming a Professional Corporation can also enhance a professional’s reputation and credibility. Clients and consumers often perceive corporate entities as more trustworthy and established than individual practitioners or small partnerships. By operating under the umbrella of a P.C., professionals can convey a sense of stability and professionalism to their clients, which can help attract new customers and retain existing ones. This enhanced reputation can also open doors to new opportunities such as partnerships with larger firms or government contracts, further growing the business’s reach and influence.

Furthermore, New Jersey P.C.’s offer professionals a structured framework to govern their operations and ensure compliance with industry regulations. These corporations must adhere to strict licensing requirements and are subject to oversight by regulatory bodies, ensuring that professionals uphold ethical standards and deliver quality services to the public. By operating within a legally mandated framework, P.C.’s help maintain the integrity of their professions and build trust with clients and the community at large.

In conclusion, New Jersey Professional Corporation is a critical business structure that provides essential benefits to licensed professionals in the state. By offering personal liability protection, access to capital, enhanced credibility, and regulatory compliance, P.C.’s enable professionals to thrive in their industries and contribute to the overall economic landscape of New Jersey. Whether you are a doctor, lawyer, accountant, or engineer, forming a P.C. can set you on a path to success and ensure that you can continue providing valuable services to your clients for years to come.

Conclusion

In forming a professional corporation in New Jersey, having someone to help you build it is not necessary but suggestible. Even though it is easy because of the listed benefits and advantages above, forming your group of professional individuals will make it somehow successful. Just make sure to be guided by the steps and ensure that every one of the details and records is accurate and precise. And if you have any questions, share them in the comment section below.

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