Legal Question in Business Law in New Jersey

Re: Forming a Corporation

No. As long as you have a local registered agent and registered office, you do not need to live or work in a state to set up a coporation or LLC. Nevertheless, you will be responsible for income tax on salary payments and pass-through income. Most likely, your business should be a limited liability company rather than a corporation.

Please check my website for information on business entity selection:

http://TaxEsq.com

Re: Forming a Corporation

An incorporated busiess or one formed as a Limited Liabilty Company (which I would probably advise if I knew more) is a separate legal "person." The owners need not live in the State in which the business entity is formed. However, the business does need to have a registered agent and a registered office in the State of formation. Ordinarily, this is not a problem. Both New Jersey and Delaware are favorite sites for corporate formation with Delaware being the formost. The purpose of requiring a Registered office and agent is so that the State can reach you if it need to. Usually this is because of a suit. It might be because of taxes. It is a requirement of all States, so the decision is one that your accountant should advise you on. The issue is usually taxation.

There is a second issue. If you believe that your business will expand rapidly to the point where stock in it might be publicly traded, there is an advantage in incorporating in Delaware. Over time, Delaware law has become very favorable to corporate management. Therefore, there are many businesses that incorporate there. The advantage is that the corporation law of Delaware has become very well defined.

My objective has always been to keep my busiess clents out of court. It's not that I don't like the money, it's that, over time, my rewards are more based on what I can save for my clients. Delaware and New Jersey law count because they are established and well-defined. New Jersey is a good second choice.

If you have a local address, you can act as the Registered Agent. If not, there are services that will do this for you. The point is that the State of registration needs to be able to get to you when it feels the need.

That said, If I were starting a new business today and did not feel that the interest would be publicly traded within a short period of time, I would do it as a Limited Liabilty Company. The LLC format provides the same protection to the owners and it is very very flexible in terms of ownerhip, compensation, duties, and succession.

The problem with an LLC is that it requires a good deal of up-front thought to set up. Sure, there are form agreements out there to do it, but the magic is that it can be tailored to your needs and that requires some work.

You also need to check on the effect of "franchise taxes." Corporations pay them to the State of incorporation. There are frequently annual minimums. Generally LLCs do not.

My advice is to do it right the first time. Don't get nasty surprises at the end of the year.

Hope that helps.