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 specific guidelines.
Benefits of Incorporation in New Jersey
A corporation enjoys advantages that unincorporated companies do not. Primarily, it cannot be held accountable for an amount of debt greater than the value of the assets that the owners have invested in it. If the business had remained a personal asset of the owners, they could run the risk of losing their personal property to pay for the company's financial liabilities in case of default. A corporation might also find it easier to finance itself through loans, allowing creditors in the Middlesex County area to evaluate their investment by assessing the corporation rather than the individual credit-worthiness of its owners. Finally, a corporation's ownership stake is divided into equal slices or "shares" of stock, which make investments in the business much easier to transfer.
Costs of Incorporation
These benefits come at a price. First, incorporation in New Jersey may require a filing fee. Second, a corporation pays taxes just like any other entity. The incomes of owners as individuals are also taxed of course, meaning that income to the corporation might be subject to double taxation. However, this disadvantage can be avoided with proper planning and help from a local Middlesex County lawyer.