For businesses seeking recognition as separate legal entities, New Jersey law allows them to undergo the process of incorporation. As a separate entity from the owners, the business is then considered to be operating on its own when it buys and sells property, assents to contracts and exercises legal rights. A business seeking to incorporate in New Jersey must file with the Secretary of State in accordance with established guidelines.
Benefits of Incorporation in New Jersey
There are distinct benefits to incorporating a business. Most importantly, liabilities the business accrues may be satisfied only by assets that the owners have specifically invested in it. If the business had remained a personal asset of the owners, they would run the risk of losing their personal property to pay for the company's financial liabilities in case of default. Also, creditors in the Atlantic Highlands area usually prefer to deal with corporations, since a loan is an investment more easily evaluated when the credit-worthiness of various owners is not an issue. Lastly, the ownership stake in a corporation can be apportioned into uniform slices, known as "shares" of stock. This makes it possible to sell ownership investments in more manageable slices.
Costs of Incorporation
Along with a possible fee to file for incorporation in New Jersey, there are other costs that corporations incur. The most important is that a corporation is taxed as its own entity. The individual incomes of owners who are paid disbursements from the corporation's earnings are still taxed as well. This is called double taxation, but it can be avoided with proper planning and assistance from a local Atlantic Highlands lawyer.