For businesses seeking recognition 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, assent 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
A corporation enjoys benefits 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. Had the business remained unincorporated, owners risk losing their personal property should the business become unable to fulfill its liabilities. Furthermore, banks in the Mountainside area prefer to evaluate the credit worthiness of a business as a whole rather than that of individual owners. This makes the process of obtaining corporate loans simpler. Lastly, a corporations charter requires that ownership be divided into stakes or "shares" of stock, all of equal size. This makes the process of transferring control much more practical.
Costs of Incorporation
These advantages 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 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 Mountainside lawyer.