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 particular guidelines.
Benefits of Incorporation in New Jersey
Advantages 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. Had the business remained unincorporated, owners risk losing their personal property should the business become unable to satisfy its liabilities. Furthermore, banks in the Woodbridge area prefer to evaluate the credit worthiness of a business as a whole rather than that of individual owners. This makes the process of acquiring corporate loans simpler. Finally, 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 comes at a price. First, New Jersey may charge a filing fee to process applications for incorporation. Also, the corporation will pay taxes 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 may avoid this disadvantage with proper planning and assistance from a local Woodbridge lawyer.