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How to Start and Run a Business in New Jersey

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diego_cervo / Getty Images
  • New Jersey is one of the most diverse and densely populated states in the country.
  • The low unemployment rate of 3.2% means the labor market is highly competitive.
  • New Jersey is home to the country's eighth largest economy, valued at $624.9 billion annually.

There are 861,373 small businesses in the state of New Jersey, which make up 99.6% of all the Garden State's businesses and employ more than 1.8 million workers. That's almost half of all the private sector employees in the state, making New Jersey's small businesses an essential component of the state economy. New Jersey is the eighth largest economy in the U.S., worth $624.9 billion annually. The economy expanded at a modest rate of 2% through 2018, which was nearly a full point lower than the national average of 2.9%.

New Jersey's unemployment rate is now 3.2%, even lower than the national unemployment rate of 3.6%. The low unemployment rate, which is due in part to New Jersey's diminished labor force, means the labor market is fiercely competitive in the Garden State. As a result, New Jersey entrepreneurs must offer more attractive compensation and benefits to attract top talent to open positions.

How are New Jersey's small business owners contending with the challenges in the most densely populated state in the country? What opportunities have they seized upon to keep their businesses healthy and growing despite those challenges? Business News Daily got in touch with some of the entrepreneurs who live and work in New Jersey to get their insights.

With more than 8.9 million people packed into just under 7,500 square miles, New Jersey is the most densely populated state in the U.S. According to the U.S. Census Bureau, New Jersey hosts about 1,195 people per square mile, as opposed to the national average of 87 people per square mile. It's also an incredibly diverse state, with the second largest Jewish and Muslim populations in the country. New Jersey is also home to a higher proportion of African Americans, Asians, Arabs and Hispanics.

"I think New Jersey offers a lot of diversity, which is really excellent," said Caroline Blazovsky, owner of My Healthy Home. "By having a business here, we can really be at the forefront of what's going on in the country. We're innovators, [and] we have a large population and big cities, so the rest of country looks to us for big ideas."

Nancy Bukovina, a mentor at Central Jersey SCORE, said access to such a robust marketplace is worth the high cost of operating. Despite the exorbitant taxes and the cost of real estate, she said there are countless opportunities for niche marketing and developing a loyal customer base, no matter what industry your business operates in.

"There are benefits that go with the high cost," Bukovina said. "You've got a dense marketplace, the ability to reach a fairly good population in close proximity, and you can do very targeted marketing." 

A significant portion of New Jersey's population works in New York City or Philadelphia, connecting the Garden State with two major metropolitan economies. The wealth and affluence that returns to the state as a byproduct translates into opportunities for small business owners. 

"We're right outside New York," said Dr. Dan Margolin, owner of the New Jersey Foot & Ankle Centers podiatry practices. "There's a lot of high-paying jobs in the city, so there is more money here than there would be in other states, and there's a lot of opportunity in that."

New Jersey's largest city is Newark, which is home to 281,944 people and connected to New York City via the Northeast Corridor train line. Jersey City, the second largest city, has 264,290 residents and sits adjacent to New York City across the Hudson River.

Deborah Fowler and Karen Carolonza, co-founders of the Parsippany-based public relations firm Green Room Communications, said their proximity to New York has helped their business succeed. 

"New Jersey is a positive for us because a lot of [our clients] travel to New York, and we're right here," Fowler said. "We've been able to reap benefits from a diverse population, all that transit, and a big economy."

A number of the business owners we spoke with said they feel supported by their local communities, who regularly patronize their establishments because they recognize the value small businesses offer their towns. In addition, some local municipalities offer small businesses access to resources and programs to encourage startups and the growth of existing businesses.

"Hillsborough Township, for example, has resources to help people who want to start businesses in the township," Bukovina said. One such resource is the Shop Hillsborough Reward Program, which offers residents a property tax incentive in return for patronizing Hillsborough businesses. 

Marla Camins, co-owner of Drama Salon and founder of Camins Communications, said that no matter the difficulties they face, she and her husband know they have a loyal following of friends, neighbors and acquaintances who prefer to shop local rather than with large chain stores.

"We have a great community, and people appreciate the fact that we're independent and not a franchise," Camins said. "That is such empowering support. Because of the business climate in general, it's harder to turn a profit, but we're really optimistic about our community and the people who continue to support us."

Daniel Sorrell, first vice president and leader of Valley National Bank's Community Lending Team, said there are encouraging signs in small business borrowing activity in New Jersey. While the recovery from the 2008 recession has been slower than many hoped, Sorrell told Business News Daily that small business borrowing is on the rise.

"I think borrowing is growing," he said. "In the last two or three years, it's ticking back upwards. We're seeing a lot of volume in applications … It just seems like things are getting better." 

Following the economic crisis of the late aughts, Sorrell said, a lot of businesses were shaken out of the marketplace, while the ones with real staying power weathered the storm. Now, he said, it seems small business owners are ready to start expanding and investing in their operations once again, as more and more seek financing.

Tech startups, which tend to be particularly voracious in terms of needing investment capital to cover immense overhead, find a lack of success when courting capital in New Jersey compared to their counterparts on the West Coast. While the capital might be available, it takes extra leg work to make the right connections and secure funding.

"Being that the East Coast is not exactly a tech hub in the way that the West Coast is thought of, we're a bit of an outcast, as most expect or want us to be in comparison to Silicon Valley," said Matt Cultrera, head of marketing at Plott, a Dover-based tech startup. "So, when it comes to investors and venture capitalists looking for the next advancement in consumer technology, we are considered less appealing right off the bat simply due to our physical location."

Compounding the difficulty of attracting private investors is a slight decrease in banks throughout New Jersey. According to the New Jersey Division of Banking, the number of financial institutions decreased from 82 in June 2017 to 68 in June 2019. Many small businesses rely on bank loans for startup and growth capital, and the reduction in financial institutions could result in difficulty securing a loan or finding favorable terms.

It's no secret to its citizens that New Jersey's taxes are pretty hefty across the board. In 2015, the top corporate income tax rate in New Jersey was 11.5%, which is higher than both its tristate neighbors of New York, which has a top rate of 10%, and Pennsylvania, which has a flat corporate tax rate of 9.99%. These figures don't include any deductions, credits or exemptions available under state laws.

For pass-through entities subject to the individual income tax, such as LLCs, New Jersey's rate is based on a six-bracket system ranging from 1.4% in the lowest tier (on incomes of $0 to $20,000 annually) to 8.97% in the highest tier (on incomes of $500,000 or greater annually). New Jersey residents also endure the highest property taxes per capita of any state in the country, according to analysis by the Tax Foundation. Its tax freedom day is the second latest in the nation: The average New Jersey resident has to work through April 30 to cover their tax bill.

"It has been difficult to operate in a state in which there is limited tax relief," said William Bauer, managing director for the Meadowlands-based leather accessory manufacturer ROYCE, to Business News Daily. "Corporate tax rates, individual income tax rates, sales tax, unemployment insurance tax and property taxes all take an immense toll on our ability to attain profits." 

New Jersey's 6.625% sales tax is the highest in the tristate area as well, with Pennsylvania at 6% and New York at 4%.

Bukovina said high taxes are part and parcel of the generally high expense of living and operating in the Northeastern U.S. That also goes for rents and the price of property, which all add up to a relatively high cost of doing business.

"What we can't help is that this is just a high-cost area," Bukovina said. "Everything costs more in New Jersey. As a brick-and-mortar, you are going to pay higher rent here than if you were in, say, Pennsylvania in the Lehigh Valley. And yes, we have high taxes, and that certainly does not help the small business person." 

New Jersey's low unemployment rate might seem encouraging at first, but it makes skilled labor a particularly high expense for small businesses. This is especially true considering small business owners must compete with wealthier corporations and midsize businesses for access to the state's top job candidates. It's punctuated by the fact that New Jersey's labor force shrunk significantly from 2013 until mid-2018, rebounding only modestly since then. Today, there are fewer than 4.5 million active workers in New Jersey's labor force.

Small business owners face a protracted fight for skilled employees, positioned against larger businesses that can more easily appeal to young workers or are more capable of giving experienced workers their desired compensation. That makes the New Jersey labor market a tough place to compete for small companies, said Harvey Bass, CEO of Stascom Technologies.

"Despite the fact that small to midsize companies are responsible for 80% of the hiring in New Jersey, millennials do not typically seek out opportunities with smaller organizations," he said. "Experienced people are usually earning too much money to make a move to a small company. Also, if your business is located within reasonable proximity to New York, you're competing for talent with cool companies based in the city."

Still, there are bright spots in New Jersey's tight labor market. For example, the Garden State is home to the most scientists and engineers per square mile in the world. That means businesses with highly technical positions can likely find job candidates with the advanced skill sets they require. New Jersey also has a robust education system, which includes Rutgers University, the New Jersey Institute of Technology, Montclair State University, Kean University and 160 other schools of higher education. In other words, the talent is available, but attracting skilled workers can be a challenge.

"Being located in such a competitive market, there are many opportunities here, but at the same time, as a startup, you really need to pay more attention to keep the best talent within your organization," said Arun Upadhyay, CEO and founder of Princeton-based LionO360. "Being next to Pennsylvania and New York, you need to constantly innovate to remain competitive and stay in business."

These questions are commonly raised when one starts a business in New Jersey. The answers below will help you file the necessary documents, pay the appropriate fees and understand the basics of starting a business in New Jersey.

Starting a business in New Jersey requires you to select a business structure and file the appropriate tax and employer identification documents.

Every good business needs a name. To ensure that the desired name for your business is available in New Jersey, you must check its availability in the state database. To do so, visit the State of New Jersey Department of the Treasury website and use the business name availability tool. It is important to be exact when checking for your desired business name, including spacing and punctuation. All business names in New Jersey must be unique. You can reserve an available business name for a short period prior to completing your business registration filings. The reservation period depends on the type of business you plan to run.

Once you've selected an available business name, you will have to incorporate to officially start your business. To do so, select a business structure, such as an LLC, S-corp or C-corp. Complete the required public records filings to receive a Certificate of Incorporation in New Jersey. Your business registration filings should include the name and address of your business, the directors and owners of the business, any shares you plan to issue, and the name and address of a registered agent to whom the state will send all official correspondence. The registered agent must be a New Jersey resident. If you plan to hire employees or open a bank account, you will also need a federal Employer Identification Number (EIN).

The state filing fee for your business registration forms is $125. The New Jersey Department of the Treasury also requires your corporation to file an annual report, the fee for which is $50. Finally, corporations must pay an annual tax fee to the New Jersey Department of Revenue. The minimum tax fee is $500.

When you register a foreign company with the New Jersey Division of Revenue, you must first receive a Certificate of Authority from the state before commencing operations. Receiving a Certificate of Authority means your out-of-state business has the right to operate inside New Jersey's borders without incorporating as a new entity. Most financial institutions also require a Certificate of Authority before lending to a business. Failure to secure the Certificate of Authority could result in enforcement action in the form of fines and financial penalties.

To apply for a Certificate of Authority in New Jersey, you must submit an application with the state Department of the Treasury along with necessary supporting documents from your home state. You must also appoint a registered agent who resides in New Jersey. The application process includes a filing fee of $125.

The cost of a New Jersey Certificate of Authority varies by business type. An LLC, nonprofit or professional corporation must pay $142 for a Certificate of Authority, while other corporations must pay $155.50.  

To register an out-of-state business with the state of New Jersey, you must include a certificate of existence or a certificate of good standing received from your home state. You must submit these documents along with your application for a Certificate of Authority from New Jersey. You must also name a registered agent who resides at a New Jersey address, to whom all official correspondence from the state will be sent.

Normal processing time for New Jersey business registration filings is two to three business weeks. You can also submit your business registration filings online; these are generally processed within 48 business hours upon receipt. Expedited processing is available for the same day or in as few as 8.5 business hours.

Foreign companies doing business in New Jersey must register for a "doing business as" name, or DBA. In New Jersey, DBAs are not available to domestic businesses that wish to go by a name other than the one included with their business registration filings. To register for a DBA, check the New Jersey Department of the Treasury's name availability tool for your desired name.

Domestic New Jersey businesses can register for an alternate name, which is distinct from a DBA. Alternate names are applied for with a Form C-150G and renewed annually with Form C-150R. Alternate names can also be renewed online at the state Department of the Treasury's website.

To dissolve a business in New Jersey, you must file the required paperwork with the state Department of the Treasury before ceasing operations. Before filing, you must also settle any outstanding balances with the New Jersey Department of Revenue. Then, you must submit a Form L-109 to the New Jersey Division of Revenue to receive a Certificate of Cancellation. On this form, you must specify the date you would like to dissolve your company. This date must be 30 days or more after the date the Division of Revenue receives the paperwork. Certificate of Cancellation fees are $100 for domestic companies and $125 for foreign companies.

Finally, you must submit a tax clearance request application to the New Jersey Division of Taxation. Once you receive a tax clearance certificate from the state, your company will no longer be obligated to pay taxes and you can officially dissolve the business.

If you're a small business owner in New Jersey looking for some resources to help you move forward, here are a few organizations you might be interested in learning more about.

SCORE's volunteer business professionals and expert mentors give counsel and guidance to entrepreneurs looking to start or expand their businesses. Their services are entirely free and volunteer-driven. Here are some of the chapters in New Jersey: 

The New Jersey Business Action Center was established in 2010 as a resource for business owners. In addition to mentoring and counseling, it can redirect entrepreneurs to a other resources throughout the state.

There are 12 Small Business Development Centers in New Jersey. Each is dedicated to supporting the development and retention of small businesses, helping entrepreneurs craft business plans, navigate the state's tax code and more.

Adam C. Uzialko

Adam C. Uzialko, a New Jersey native, graduated from Rutgers University in 2014 with a degree in political science and journalism and media studies. He reviews healthcare information technology, call centers, document management software and employee monitoring software. In addition to his full-time position at Business News Daily and Business.com, Adam freelances for several outlets. An indispensable ally of the feline race, Adam is owned by four lovely cats.

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