For businesses seeking identification as separate legal entities, New Jersey law allows them to undergo the process of incorporation. When an incorporated business acts, whether it is to buy and sell property, agree to contracts or exercise legal rights, the process is then attributable to the business itself and not its owners. To incorporate in New Jersey, a business must file with the Secretary of State in compliance with certain guidelines.
Benefits of Incorporation in New Jersey
Certain advantages inure to a business in New Jersey that has incorporated over one that has not. First, a corporation's liabilities can never go beyond the amount invested in the business by the owners. With unincorporated businesses, personal property of owners can be liquidated in order to fulfill the liabilities of the business. Furthermore, banks in the Cinnaminson area prefer to evaluate the credit worthiness of a business as a whole rather than that of individual owners. This makes the process of receiving corporate loans simpler. Lastly, ownership of a corporation is divided into equal portions or "shares" of stock, which may be bought and sold much more easily than the ownership of an unincorporated business.
Costs of Incorporation
Incorporation can be costly. First, a modest filing fee might be charged in New Jersey for any business that wants to incorporate. Also, a corporation is taxed as its own entity. In other words, the profits a corporation makes are now taxed separately, while any disbursements to shareholders are taxed as individual income. This is called double taxation. However, a business might avoid this disadvantage with proper planning and assistance from a local Cinnaminson lawyer.