Are you a professional looking to establish a business in New Jersey? Forming a professional corporation can offer various benefits such as liability protection and tax advantages. To help you navigate the process, this guide will outline the steps to form a professional corporation in New Jersey in 2023.
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Before we proceed, let's understand what a professional corporation (PC) is. A professional corporation is a legal structure specific to certain licensed professions, such as doctors, lawyers, engineers, accountants, and architects. It allows for individuals within these professions to form businesses while maintaining personal liability protection.
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Now, let's delve into the steps you need to take to establish a professional corporation in New Jersey:
Step 1: Choose a Name for Your Professional Corporation
Selecting an appropriate and unique name for your business is crucial. The New Jersey Division of Revenue and Enterprise Services requires professional corporations to include a designation such as "Professional Corporation," "Professional Association," or the abbreviation "P.C." in their names. You should also ensure that your chosen name complies with state regulations and isn't already in use by another company registered in New Jersey.
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Step 2: Appoint Professional Shareholders
In a professional corporation, shareholders are typically professionals licensed in the respective field. The New Jersey Business Corporation Act mandates that a minimum of one shareholder must be a licensed professional. Each shareholder will be accountable for the quality of their services when acting within the corporation.
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Step 3: Draft and File Articles of Incorporation
The next step is to draft and file the articles of incorporation with the New Jersey Secretary of State. The articles should include essential details such as:
- Name: Mention the chosen name of your professional corporation.
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- Purpose: Clearly state the professional services the corporation intends to provide.
- Registered Agent: Appoint a registered agent who will receive legal and official communication on behalf of the corporation.
- Shareholders: List the names and contact information of all professional shareholders.
- Authorized Shares: Determine the number and types of shares the corporation is authorized to issue.
Once you have prepared the articles of incorporation, submit them along with the necessary filing fees to the New Jersey Secretary of State.
Step 4: Obtain Necessary Licenses and Permits
Before commencing business operations, you must obtain any required licenses or permits specific to your profession. Consult with the appropriate professional licensing board in New Jersey to determine the necessary qualifications and permits for your field. Compliance with all licensing requirements is vital to ensure legal operations of your professional corporation.
Step 5: Establish Corporate Bylaws and Policies
Developing corporate bylaws is essential to guide the internal operations of your professional corporation. Bylaws typically cover aspects such as shareholder rights, roles and responsibilities of officers and directors, meeting procedures, and voting requirements. Ensure you follow best practices when creating your bylaws, and have them signed and adopted by all shareholders.
Alongside bylaws, establish specified corporate policies governing important areas such as financial decision-making, code of conduct, and conflict resolution. Thoroughly documented and communicated policies contribute to transparency and smooth operation within a professional corporation.
Step 6: Apply for an Employer Identification Number (EIN)
To file taxes and hire employees, you will need an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). You can apply for an EIN online via the IRS website. Prepare the necessary details, such as the legal name, mailing address, and type of business entity, to streamline the application process.
Step 7: Comply with Ongoing Requirements
After successfully forming your professional corporation, you need to fulfill ongoing compliance requirements in New Jersey. Maintain accurate records of corporate meetings and resolutions, file annual reports with the New Jersey Secretary of State, and renew licenses and permits as required by your profession.
Remember to consult with legal and tax professionals throughout the formation process to ensure you adhere to all legal obligations and optimize the benefits offered by a professional corporation.
In conclusion, establishing a professional corporation in New Jersey involves multiple steps, ranging from selecting a suitable name to meeting ongoing compliance requirements. By following this comprehensive guide, you can navigate the process successfully and lay the foundation for a thriving professional corporation in New Jersey in 2023.
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