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
Benefits of incorporation are many. The primary benefit is that the liabilities of the business can only be satisfied by the assets specifically invested into the company by the owners. 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. Furthermore, a business that has not incorporated puts the unnecessary burden on creditors in the Somers Point area to evaluate the credit worthiness of individual owners rather than that of the business, making loans more difficult. 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
There are costs associated with incorporation, both short and long term. First, businesses in New Jersey might be charged a fee to incorporate. Also, a corporation is taxed as its own entity. Disbursements to the owners of the corporation are also taxed as individual income, so this means earnings might be taxed twice. But this double taxation can be avoided with proper planning and help from a local Somers Point lawyer.