For
NJ taxpayers thinking of starting a one-person business - here is a FAQ I
developed for a one-person LLC in the state of New Jersey for the NJ SCORE
organization a few years ago
1.
Is an LLC necessary for the limited
amount of business I am doing?
While not necessary, it is a good
idea for any sole proprietorship to register as a one-person LLC, as an added
precaution. It is easy, inexpensive, and
adds an extra layer of liability protection “just in case”.
{I have advised in my book THE NEW SCHEDULE C NOTEBOOK – “Every sole
proprietorship, whether a part-time sideline business or a full-time activity,
should register with their state as an LLC – assuming state law allows and the
costs are not prohibitive.” – rdf}
2.
What is the fee schedule for
registering an LLC in NJ?
The filing fee for registering an
LLC in NJ is $125.00. It can be done
online at – https://www.njportal.com/DOR/BusinessFormation/Home/Welcome
Here
is the website of the fee schedule for LLC filings – http://www.state.nj.us/treasury/revenue/dcr/geninfo/fees_pd.shtml#llc_file
3.
What is involved in the annual
reporting for an LLC and what is the fee?
A one person LLC normally reports
income and expenses the same as a “regular” sole proprietor - on Schedule C of
the proprietor’s annual Form 1040. There
is no separate income tax filing, as is the case with a corporation. The owner does not receive a salary,
requiring additional payroll tax filings, but a “draw”. All the tax deductions and benefits allowed
to a “regular” sole proprietor – deduction of health insurance premiums,
deduction for a “home office” (if there is a profit) and the ability to
establish a self-employed retirement plan are deductible on the 1040 of the
owner of a one-person LLC. The only
separate filing requirement is an “Annual Report” filed online with the State
of NJ. This filing includes an annual
fee of $50.00 (tax deductible).
4.
Is Business Liability Insurance cheaper
with or without an LLC?
The amount of a business’s liability
insurance coverage should reflect the potential liability that the business
could incur. The cost of registering and
maintaining an LLC is so small that excessive liability coverage would probably
be more expensive. The mere fact that a
business is registered as an LLC does not replace the need for business
liability insurance, just as incorporating a business does not. Limited liability merely helps to protect the
owner’s personal assets in the case of a lawsuit. A business, regardless of how organized or
registered, would need liability insurance if there is potential for liability.
5.
I already have a NJ Business
Registration Certificate – where else should I register?
This should be all you need to do to
register your business with the State of NJ.
If you do decide to register as an LLC you may need to file a corrected
registration.
6.
In NJ, where should I register my
business name on the federal, state, county, city level?
If "This Is My Business"
is the name of the business (or, for example "This Is My Business, LLC)
and it has been given an EIN by the IRS and is registered with the State of NJ
(and you have a NJ BRC) there is no other required registration that I know
of. You would only need to register a
“trade name” if you were using a different name (i.e. the business was
organized as John Doe, LLC, but you want to operate as "This Is My
Business"). As stated above, if
registering an existing business as an LLC you may need to notify the IRS
and/or State of NJ of the change.
7.
I haven’t received any forms from NJ
to report quarterly losses – am I supposed to request them?
As either a “regular” sole proprietor or a
one-person LLC you do not have to file any quarterly forms to report losses, or
income. You simply report the activity
for the year on Schedule C of your annual Form 1040. You would only need to file quarterly reports
if you hired employees (you are not be an employee).
TTFN
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