Learn How to Form an New Jersey Professional Corporation

Should you form a professional corporation or a limited liability corporation?

Now that you’ve brainstormed a solid business idea, you need to decide which business structure you’ll adopt. This step impacts how you’ll pay taxes and the type of liability protection you and your company will receive.

New Jersey doesn’t have a professional limited liability corporation (PLLC) option. You can choose between either a limited liability corporation (LLC) or a PC. To start a PC, you must be licensed to provide professional services, such as engineering, medical care, legal services, or veterinary care, in New Jersey.

The formation of a standard LLC is more straightforward. However, if you want to receive high-level liability protection, forming a PC is likely the better option. For those interested in an LLC, here’s a guide to forming a New Jersey LLC.

Ownership

The owners of a New Jersey PC are shareholders. They own shares in the business. Those with a higher percentage of shares own a more significant portion of the PC.

Management

A board of directors manages a PC. They’re responsible for making decisions that impact the corporation’s future. A CEO is appointed to oversee day-to-day operations.

Choose a name for your New Jersey PC

With your business plan ready and the desired business structure chosen, the next step is to select a name for your new PC. For best results, make sure that it meets these three requirements:

• Describes your service
• Is unique from other businesses
• Is simple and easy to understand

Your name must satisfy certain legal requirements detailed in the New Jersey Professional Services Corporation Act. For instance, it must include the phrase “Professional Corporation,” “Professional Association,” “Charted,” or a recognized abbreviation, such as “P.C.” or “PA.” Additionally, it must not contain any other business abbreviations, such as “LLC.” Lastly, it must not include words that refer to specific business types, e.g., “bank,” unless your corporation plans to provide that service.

Once you search the state’s business database, you may discover that your preferred name is in use. If this happens, think of some others then check their availability. If you find a suitable name and are concerned someone else might take it before you’re ready to file the paperwork to officially launch your business, you can contact the Secretary of State or use ZenBusiness’s name reservation service to hold your business name for 120 days.

You’ll also want to book a domain name for building your corporation’s website. Make your reservation using the ZenBusiness domain registration service.

Select a New Jersey registered agent

New Jersey requires all PCs to appoint a person or entity to receive communications from the Secretary of State and legal notices regarding pending lawsuits. The designated individual or entity must have a physical office address in the state and operate during standard business hours.

Choosing a registered agent is straightforward. You can engage a service, appoint someone (with their permission), or be your own registered agent. To save time and minimize the burden of being around the office continuously, consider hiring a professional like the ZenBusiness registered agent service to perform these functions.

Complete your New Jersey Articles of Incorporation

Once approved, the Articles of Incorporation register your company with the state. The incorporator is the person responsible for drafting and submitting the Articles of Incorporation. You can choose to handle the filing yourself and, as a result, serve as your own incorporator, or appoint someone else. This process is completed online and requires a $125 filing fee that’s paid electronically.

Establish a corporate record in New Jersey

A corporate record is a digital or physical book containing important company documents and company decisions, including minutes of all meetings. New Jersey requires all PCs to have a corporate record kept in a secure digital or physical location.

Designate a professional corporation board of directors

You and the other founders of the PC will need to appoint an initial board of directors (BOD) and record their appointment in the incorporator’s statement.

All members of the initial BOD must be licensed in the profession that the PC was formed under. They’ll serve until the first annual shareholders meeting, when a new board will be elected.

Create New Jersey corporate bylaws

New Jersey requires all PCs to have bylaws that govern the organization’s operation. This document should be drafted, signed, and filed in the corporate record by the initial directors.

Hold the first board meeting

The incorporator arranges and attends the first board meeting. During this meeting, the directors will:

• Review and adopt the bylaws
• Appoint corporate officers
• Authorize stock issuance

Handle New Jersey tax obligations

All PCs must have a federal Employer Identification Numbers (EIN). The EIN, which can be obtained from the IRS at no cost, is useful when filing corporate taxes, hiring employees, and completing many other activities. ZenBusiness can also help you apply for an EIN. Once you have your EIN, you will need to file the form NJ-REG to register your business with the state for tax purposes.

You’re also expected to pay state taxes, such as Corporation Business Tax and Sales & Use Tax. You can file and pay most of these taxes online. Lastly, contact your local city and county clerks to find any local tax responsibilities that your PC should pay.

Obtain New Jersey business licenses and permits

New Jersey doesn’t issue any general state business licenses to PCs. You have to research all the licenses and permits you should obtain at the federal, state, local, and industry levels. ZenBusiness has a comprehensive business license report service to help with this.

Insure your New Jersey PC

Although not required by New Jersey law, PLLCs should strongly consider general business liability insurance to protect from a variety of risks related to business property, employees, and daily operations. Choosing to run a business in New Jersey without this coverage could lead to handing a costly claim on your own.

PCs also need to consider the risks of a professional malpractice claim, and a general liability policy does not cover these claims. In New Jersey, some professions are required by law to have malpractice insurance, such as lawyers and healthcare professionals. You can find a complete list in the Professions and Occupations section of the New Jersey Statutes. You’re also required to get workers’ compensation insurance if your company has three or more employees.

For more specific insurance requirements for professionals, you can contact an attorney, insurance agent, or the state licensing board of that particular profession.

Open a business bank account

To facilitate financial activities, such as accepting payments, paying taxes, and compensating employees, you’ll have to open a business bank account for your PC. Have your EIN as well as the Articles of Incorporation on hand when you apply.

Ready to start your business?

At ZenBusiness, we are proud to support small businesses through a variety of different tools and services. Whether you need a registered agent service, want to reserve a business name, or are seeking a domain name, our goal is to help you stay on the road to success. Check out our services and contact us today to see how we can help you grow your company.