Thinking about setting up your own business in New Jersey but not sure where to begin? Don’t worry. Our step-by-step guide is here to help you through the process.

Steps To Start A Business In New Jersey

Step 1: Choose a Business Idea

The first order of business to take care of when starting a business in New Jersey is deciding what your business will do. Perhaps you’ve already got a brilliant idea, or maybe you’re still thinking about what suits you best. Either way, we’ve got a collection of business ideas that can help. It’s packed with details on different industries, how much it might cost to get started, and plenty more to get your gears turning.

Step 2: Write a Business Plan

No matter what type of business you start, a business plan should be your next step. A business plan not only helps to get funding, but it will also help you define the goals of your business and create a roadmap to keep on course.

A business plan covers several key areas, such as the details of the market you’re entering, what you’re offering or selling, your marketing strategies, day-to-day operations plans, costs to start, financial forecasts, and any other information that’s important to running your business. This detailed plan will help you refine your steps, plus banks or investors will want to see one before considering funding your project.

Related: How to write a business plan

Step 3: Find Financing

Without funding, it may be impossible to start your business, so the next step is to make sure you have the money available. After calculating how much you can personally put into the project, here are some common sources of startup funding:

One option is to apply for a conventional bank loan. Banks typically require collateral, a personal investment between 15% – 25% of the total startup costs, and a personal guarantee from anyone owing 20% or more of the business.

If the bank determines the loan as too risky, the Small Business Administration (SBA) can provide the bank with a loan guarantee to reduce the lender’s risk. The most popular SBA loan program is the 7(a) Loan Program, which can be used for various purposes, including working capital, equipment purchases, and real estate.

Microloans, which are small, short-term loans designed to help small businesses and startups with limited financing needs, are another option. In New Jersey, several organizations offer microloan programs, such as the Main Street Micro Business Loan from the New Jersey Economic Development Authority (NJEDA) and the UCEDC microloan program. These programs typically provide loans up to $50,000, with lower interest rates and more flexible terms than conventional bank loans. Microloans can be an excellent option for businesses that require a smaller amount of capital or do not qualify for traditional bank loans.

Researching small business grants is very popular, however, it’s not common for there to be grants for startups.

Finally, investors such as the Jumpstart NJ Angel Network can provide a source of funding for new businesses in New Jersey. Investors may provide equity financing or debt financing depending on their preferences and risk tolerance levels.

Related: Understanding the different types of business funding

Step 4: Select a Business Structure

The next step to starting a business in New Jersey is selecting a business structure. A business structure (also called a business entity) is how a business is legally formed to conduct business. New business owners need to consider their choices, as it will determine how the business is taxed and its owner’s personal liability.

In New Jersey, there are four common types of business entities: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).

Sole proprietorship: A sole proprietorship is the simplest business structure, where the owner and the business are considered the same legal entity. This means the owner is personally responsible for all debts and liabilities of the business.

Pros

• Easy and inexpensive to set up.
• Owner has full control of the business.
• No separate business tax filings are required.

Cons

• Owner has unlimited personal liability for business debts and obligations.

Related: How to start a New Jersey sole proprietorship

General partnership: A general partnership is a business structure where two or more individuals jointly own and operate the business. Each partner is personally liable for the business’s debts and obligations.

Pros

• Simple and inexpensive to establish.
• Shared management and financial responsibility.
• No separate business tax filings are required.

Cons

• Each partner has unlimited personal liability for the business’s debts and obligations.
• Potential for conflicts among partners if not properly managed.

Corporation: A corporation is a separate legal entity owned by shareholders. It provides limited liability protection for its owners and is subject to specific regulations and tax requirements.

Pros

• Limited liability protection for shareholders.
• In addition to debt, a corporation can raise capital through the sale of stock.

Cons

• More complex and expensive to set up and maintain.
• Can be subject to double taxation, where profits are taxed at the corporate level and again when distributed as dividends to shareholders.
• Increased regulatory requirements and paperwork.
• Must appoint a New Jersey registered agent.

Related: How to form a New Jersey corporation

Limited Liability Company (LLC): An LLC is a hybrid structure that combines a corporation’s limited liability protection with a sole proprietor or partnership’s operational flexibility.

Pros

• Limited liability protection for owners (members).
• Pass-through taxation, where profits and losses are reported on the owner’s personal tax return, avoids double taxation.
• Flexibility in management structure.

Cons

• More complex and expensive to establish compared to sole proprietorships and general partnerships, but easier than a corporation.
• Must appoint a New Jersey registered agent.

Related: How to form an LLC in New Jersey

Step 5: Register the Business

After setting up the business structure, the next step in starting a business in New Jersey requires obtaining various licenses and permits. Depending on the type of business you are starting and where it’s located in the state, there may be one or more agencies to register with.

• Business licenses: The first step is registering your business with the State of New Jersey. This can be done online through the Business Registration Portal or by filing form NJ-REG. You will need to provide information such as your business name, address, contact information, and other relevant details. Once registered, you will receive a Business Registration Certificate from the State of New Jersey.
• Employer Identification Number: The Employer Identification Number or EIN (sometimes referred to as the Federal Employer Identification Number or FEIN) is a nine-digit tax identification number issued by the Internal Revenue Service (IRS). Needed by partnerships, corporations, multi-member LLCs, or any business entity with employees, the EIN is used by employers to report taxes and other financial information related to their businesses.
• Business name registration: Sole proprietorships and partnerships operating under a business name will need to register for a Certificate of Trade Name (sometimes referred to as a DBA or Doing Business As) with the County Clerk’s office where the business will be located.
• Sales tax certificate: Businesses selling products and certain services will need to register for a Sales Tax Certificate with the New Jersey Department of the Treasury.
• Professional licensing: Besides registering your business and obtaining an EIN, you may also need specific licenses or permits depending on your business type. Some occupations, such as contractors, landscapers, child care centers, and barbers, require occupational licenses before offering their services in New Jersey.

Related: What business licenses and permits are needed in New Jersey

Step 6: Open a Business Bank Account

Now that the business is set up and registered, the next step is to open a business bank account. Opening a separate bank account goes beyond just keeping your money organized. Having a separate personal and business account will make your life easier come tax season and help to better understand how your business is doing financially.

Step 7: Hire Employees

If you will be hiring, there is a lot for a new employer to prepare for in New Jersey.

Before hiring your first employee, new employers will need to comply with all relevant employment laws and regulations, in addition to registering with the New Jersey Department of Labor and Workforce Development, the New Jersey Department of Treasury, and the IRS.

Employers are also responsible for reporting new hires, verifying employees are eligible to work in the U.S., income tax withholding, unemployment insurance, unemployment taxes, and payroll withholding taxes, including Social Security and Medicare.

Related: Steps to hiring your first employee in New Jersey

Step 8: Obtain Business Insurance

Next, as a business, you may want to look into having small business insurance in place.

Most types of business insurance are optional, except for workers’ compensation insurance, which is required for all New Jersey employers. But, even if insurance isn’t required, and there is a fire, theft, or personal injury lawsuit, the business owner may have to pay out-of-pocket damages and legal fees.

Related: Types of insurance your business may need

Step 9: Track Income and Expenses

Bookkeeping is the next step in starting a small business. By maintaining accurate and organized financial records, you are better equipped to be in compliance with tax reporting requirements and managing your business’s finances.

Recording this information can be simplified through accounting software like QuickBooks or Xero, which automates tasks like invoicing and bank reconciliations. Alternatively, a well-structured paper filing system can ensure easy access to physical documents. For those lacking time or resources, outsourcing to a professional bookkeeper can provide expert guidance on maintaining financial records.

Related: Setting up accounting for a business

This material is property of StartingYourBusiness.com

Common questions when starting a business in New Jersey

New Jersey Small Business Resources

There are 952,029 small businesses in New Jersey, which is 99.6% of all businesses in the state,¹ and 48.8% of New Jersey employees work for a small business.² Because of the economic impact of small businesses, there are a number of small business resources to help New Jersey businesses start and grow. Some of these include:

• New Jersey Business Action Center: The NJBAC offers support to businesses by obtaining answers from government agencies, directing inquiries to the correct officials or contacts, facilitating meetings, and ensuring follow-ups with regulatory bodies.
• New Jersey Small Business Development Center: The SBDC offers support services, including guidance on business development and strategies for expansion.
• SCORE: SCORE’s volunteers provide mentoring and educational resources to small businesses.
• Small Business Assistance Program: The SBAP helps New Jersey’s small businesses navigate the complex landscape of environmental regulation.
• Women’s Center for Entrepreneurship: This organization assists female entrepreneurs with services, including classes, counseling, and guidance on accessing available funding options.

Sources

1. Small Business Administration ↩︎
2. Census Bureau ↩︎