Starting a Professional Corporation in New Jersey 2024: Ultimate Guide

How to Start a Professional Corporation in New Jersey

Licensed professional? Level up your business with New Jersey professional corporation! Enjoy unique benefits like New Jersey LLC, such as limited liability, tax perks, and a polished image. Our step-by-step guide unravels the essentials for smooth compliance and the right fit. LLCBase has your back with expert guidance, so make an informed decision and triumph in New Jersey with your professional corporation today!

This guide will review the requirements for starting a professional corporation in New Jersey, explore the advantages and disadvantages of this business structure, and help you determine if it is the right fit for your business goals.

What is a Professional Corporation

A Professional Corporation (P.C.) is a unique type of corporation designed for licensed professionals, such as doctors, dentists, lawyers, architects, and accountants. Forming a P.C. allows licensed professionals to offer their services through a corporate structure, providing them with the benefits of a traditional corporation, such as limited liability protection and tax advantages. Forming a professional corporation in New Jersey is a popular choice due to the thriving professional landscape and business-friendly environment. When starting a professional corporation, choose a reliable formation service in New Jersey.

The primary purpose of New Jersey Professional Corporation is to protect its owners from personal liability for the corporation’s actions. The shareholders’ personal assets are protected if the professional corporation faces legal issues. Moreover, New Jersey professional corporations can offer certain tax benefits, such as deducting employee benefits and operating expenses. These advantages make forming a professional corporation an attractive option for many professionals in New Jersey.

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Who Can File Under Professional Corporation Laws

Under New Jersey Professional Corporation laws, only certain licensed professionals are eligible to form a professional corporation. The specific professions allowed to form a P.C. may vary slightly by state, but in New Jersey, the following professionals can typically form a professional corporation:

  • Physicians and Surgeons
  • Dentists
  • Chiropractors
  • Optometrists
  • Podiatrists
  • Certified Public Accountants
  • Architects
  • Engineers and Land Surveyors
  • Psychologists
  • Marriage and Family Therapists
  • Clinical Social Workers
  • Professional Clinical Counselors
  • Veterinarians
  • Attorneys
  • Speech-Language Pathologists
  • Pharmacists
  • Registered Nurses
  • Physical Therapists
  • Occupational Therapists
  • Acupuncturists

Each profession has its governing licensing board, which sets specific rules and regulations for forming and operating a professional corporation. It is essential to check with the relevant board and state laws to ensure that your profession is eligible to form a professional corporation and to understand the specific requirements associated with your profession.

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Structure of a Professional Corporation

  • Shareholders: New Jersey Professional Corporation’s shareholders must be licensed professionals in the same field as the corporation’s purpose. For example, if a professional corporation is formed to offer legal services, all shareholders must be licensed attorneys. This requirement ensures that the professional corporation’s management comprises qualified individuals with relevant expertise.
  • Directors: The directors of a professional corporation in New Jersey are responsible for overseeing the corporation’s operations and making high-level decisions. The directors must also be licensed professionals in the same field as the corporation’s purpose. The number of directors required depends on the specific licensing board’s regulations, but typically a minimum of one director is needed.
  • Officers: The officers of New Jersey Professional Corporation manage the professional corporation. Officers typically include a President, Secretary, and Treasurer. However, additional officers can be appointed as needed. While not all officers must be licensed professionals, the President must hold a valid license in the same field as the corporation’s purpose.

Starting a Professional Corporation in New Jersey: A Guide

Here is a detailed guide to starting a professional corporation in New Jersey that you should follow.

Step 1: Appointment of Registered Agent

The first step in forming a Professional Corporation is appointing Registered Agent in New Jersey. This individual or company will act on behalf of the corporation, receiving official notices and legal documents. The agent must have a physical address in New Jersey and be available during regular business hours.

We compiled the list of the best registered agent services in New Jersey to help you choose the one you can rely on.

Step 2: Choosing the Name of the Corporation

Selecting a name for your New Jersey Professional Corporation is crucial. The name must be unique and appropriate, including the words “professional corporation” or the abbreviation “P.C.” It must also comply with the rules and regulations of the governing licensing board and should not be confusingly similar to an existing corporation’s name.

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Step 3: Drafting of By-laws

By-laws are the internal rules and regulations governing the management and operations of the professional corporation. These should include provisions related to the appointment of directors, issuance of shares, and any restrictions imposed by the licensing board.

Step 4: Appointment of Board of Directors

The board of directors oversees the management and operations of the New Jersey Professional Corporation. Directors must be licensed professionals in the same field as the corporation’s purpose.

Step 5: Conduction of Board Meetings

Regular board meetings are essential for maintaining the proper functioning and compliance of the professional corporation. The by-laws should specify the frequency, notice requirements, and procedures for conducting these meetings.

Step 6: Issuance of Corporate Shares

Shares represent ownership in the corporation. The professional corporation must issue shares to its shareholders, who must be licensed professionals in the same field. Share issuance should comply with the by-laws and any restrictions imposed by the licensing board.

Step 7: Comply with State Requirements

Forming New Jersey Professional Corporation requires compliance with specific state requirements, such as obtaining necessary permits and licenses, paying fees, and adhering to rules and regulations the governing licensing board sets forth.

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Step 8: Filing of Statement of Information

New Jersey professional corporations must file an annual report with the New Jersey Secretary of State. This document includes essential information about the corporation, including its name, address, Registered Agent, and directors.

Step 9: Getting Tax Permits from the State

The professional corporation must obtain the necessary tax permits from the New Jersey Division of Taxation, such as an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).

Step 10: Opening of a Bank Account

Finally, open a separate bank account for the New Jersey Professional Corporation to maintain proper accounting and financial records.

Fees Associated with Professional Corporation in New Jersey

Here are some of the most common fees when starting a professional corporation in New Jersey.

  • State Laws and Regulations: To form a professional corporation in New Jersey, it is crucial to comply with the state laws and regulations governing professional corporations. The New Jersey Statutes Title 14A and the specific licensing board’s regulations for each profession outline the requirements and restrictions for professional corporation formation. Before starting the process, professionals should consult with their licensing board to ensure they meet the necessary qualifications.
  • Incorporation Process: Once the licensing requirements are met, the next step to form a professional corporation in New Jersey is to draft and file the Certificate of Incorporation with the New Jersey Secretary of State. This document includes essential information about the corporation, such as its name, address, purpose, and number of authorized shares. Filing the Certificate of Incorporation requires a filing fee currently $125 for most professions. However, it is essential to check with the New Jersey Secretary of State for the specific fee associated with your profession.
  • Naming Requirements: You must follow specific rules when choosing a name for a Professional Corporation in New Jersey. The name must include the words “Professional Corporation,” “P.C.,” or “Prof. Corp.” Additionally, the name cannot be misleading or too similar to an existing corporation’s name. Conducting a name search with the New Jersey Secretary of State is recommended to ensure the chosen name is available. This search is free, but reserving a name before filing the Certificate of Incorporation requires a reservation fee of $50 online and $50 mail.
  • Certificate of Incorporation: The Certificate of Incorporation is a critical document for forming a professional corporation in New Jersey. It outlines the corporation’s essential information, such as the name, address, purpose, and number of authorized shares. The Articles must also include a statement that the corporation is a professional corporation and the specific profession it practices. Once completed, the Certificate of Incorporation must be filed with the New Jersey Secretary of State, accompanied by the appropriate filing fee.
  • Additional Fees and Costs: In addition to the filing fees mentioned above, forming Professional Corporation in New Jersey may involve other costs, such as:
    • Annual Report: professional corporations must file an initial Statement of Information with the New Jersey Secretary of State every End of the corporation’s fiscal year of filing the Certificate of Incorporation. The filing fee for this form is $75.
    • Licensing and Permit Fees: Depending on the specific profession, the governing licensing board may require additional licensing and permit fees.
    • Registered Agent Fee: Hiring of Registered Agent service will likely involve an annual fee of $50 – $200, which can vary depending on the service provider.
    • Legal and Accounting Fees: Forming a professional corporation may involve consulting with attorneys and accountants, which can result in additional professional fees.

Advantages of a Professional Corporation

  • Limited Liability Protection: One of the main benefits of a professional corporation is its limited liability protection to its shareholders. This means the shareholders’ assets are protected from the corporation’s debts and liabilities.
  • Tax Benefits: Professional Corporations enjoy specific tax benefits, such as deductions for business expenses and the ability to retain earnings within the corporation.
  • Business Credibility: Operating as a professional corporation can enhance the credibility and reputation of the professional services, demonstrating a commitment to compliance and professionalism.
  • Continuity of Operations: A professional corporation has a perpetual existence, ensuring the continuity of operations even if the shareholders or directors change.

Disadvantages of a Professional Corporation

  • Complexity and Cost of Formation: Forming a professional corporation can be more complex and costly than other business structures, such as sole proprietorships or partnerships.
  • Ongoing Compliance Requirements: professional corporations must adhere to ongoing compliance requirements, including regular board meetings, filing annual reports, and maintaining proper records.
  • Limited Flexibility in Management: professional corporations may need more flexibility in management, as the board of directors must consist of licensed professionals in the same field.

Taxation of Professional Corporations

Here are the taxes that your professional corporation must pay in New Jersey:

Federal income tax

A professional corporation in New Jersey is subject to federal income tax on its net earnings. However, a P.C. can elect to be taxed as an S corporation, which allows the corporation’s income, deductions, and credits to pass through to the shareholders. This can result in significant tax savings by avoiding double taxation.

State taxes

New Jersey Professional Corporation is also subject to state taxes, such as the New Jersey franchise tax, which is based on the corporation’s annual net income. Additionally, depending on the nature of its operations, the professional corporation may be subject to other state and local taxes, such as payroll and sales taxes permit in New Jersey.

Tax deductions and exemptions

A professional corporation in New Jersey can take advantage of various tax deductions and exemptions, such as deductions for employee benefits, operating expenses, and depreciation. These deductions can help reduce the corporation’s taxable income, ultimately leading to tax savings for the P.C. and its shareholders.

Alternatives to Professional Corporations in New Jersey

If you decide that a professional corporation is not for you, then you might consider the following alternatives.

  • Sole Proprietorships: A simpler business structure is where an individual operates the business under their name without limited liability protection.
  • Partnerships: Two or more individuals join to operate a business, sharing profits, losses, and responsibilities.
  • Limited Liability Companies (LLCs): A hybrid business structure that combines the limited liability protection of a corporation with the tax benefits and flexibility of a partnership.
  • S-corporations: Starting an S Corp in New Jersey avoids double taxation by allowing income, losses, and deductions to pass through to the shareholders’ personal tax returns.

FAQs

What is a professional corporation?
A professional corporation is a type of business entity that provides professional services in professions such as law, accounting, and healthcare in New Jersey.
Who can form a professional corporation in New Jersey?
Only licensed professionals in New Jersey such as doctors, attorneys, accountants, and architects can form a professional corporation in the state.
What are the benefits of starting a professional corporation in New Jersey?
The benefits of starting a professional corporation in New Jersey include limited personal liability, increased credibility, and potential tax advantages.
What types of professionals are required to form a professional corporation in New Jersey?
New Jersey allows licensed professionals in healthcare, law, accounting, and architecture to form a professional corporation.
Can professional corporations have multiple owners in New Jersey?
Yes, professional corporations in New Jersey can have multiple owners.
Do you need a lawyer to form a professional corporation in New Jersey?
While it is not required by law, it is highly recommended to seek the assistance of a lawyer to form a professional corporation in New Jersey.
How much does it cost to form a professional corporation in New Jersey?
The cost to form a professional corporation in New Jersey varies depending on the type of licensed professional. However, it can range between $125 and $300.
How long does it take to form a professional corporation in New Jersey?
It typically takes 2-3 weeks to form a professional corporation in New Jersey.
What is the process for filing for a professional corporation in New Jersey?
The process for filing for a professional corporation in New Jersey begins with the submission of articles of incorporation to the New Jersey Division of Revenue and Enterprise Services.
Can a professional corporation provide services outside of New Jersey?
Yes, a professional corporation in New Jersey can provide services outside of the state.
Is a professional corporation the same as a limited liability company (LLC) in New Jersey?
No, a professional corporation is not the same as an LLC in New Jersey. A professional corporation is solely for licensed professionals, while an LLC is for non-professionals as well.
What are the annual requirements for a professional corporation in New Jersey?
The annual requirements for a professional corporation in New Jersey include filing an annual report and paying an annual fee.
Can a professional corporation convert to another business entity type in New Jersey?
Yes, a professional corporation in New Jersey can convert to another business entity type.
Does a professional corporation need liability insurance in New Jersey?
While liability insurance is not required by law, it is highly recommended for a professional corporation in New Jersey to protect against any potential lawsuits.
Can a professional corporation have a business name that does not include the names of the owners in New Jersey?
Yes, a professional corporation in New Jersey can have a business name that does not include the names of the owners.
Is any published notice required for a professional corporation in New Jersey?
No, there is no legal requirement to publish a notice for a professional corporation in New Jersey.
What is the minimum number of shareholders required for a professional corporation in New Jersey?
In New Jersey, professional corporations can have a minimum of one shareholder.
Can a professional corporation issue stock in New Jersey?
Yes, a professional corporation can issue stock in New Jersey.
How does the taxation for a professional corporation differ in New Jersey?
The taxation for a professional corporation in New Jersey is at the corporate level instead of the individual level.
What is the advantage of paying oneself a salary from a professional corporation in New Jersey?
Paying oneself a salary from a professional corporation in New Jersey allows the owner to contribute to Social Security, Medicare, and other benefits.
Is an Operating Agreement required for a professional corporation in New Jersey?
No, an Operating Agreement is not required for a professional corporation in New Jersey. However, a shareholder agreement may be helpful.
What is the New Jersey Professional Corporation Act?
The New Jersey Professional Corporation Act is legislation that governs a professional corporation in New Jersey.
Can a professional corporation file for bankruptcy in New Jersey?
Yes, a professional corporation can file for bankruptcy in New Jersey.
Do professional corporations in New Jersey need to follow certain ethical standards?
Yes, professional corporations in New Jersey are required to follow certain ethical standards related to professional conduct.
What is the timeframe for renewal of professional corporation in New Jersey?
A professional corporation in New Jersey needs to renew its certificate of authority on a biennial basis or before the expiry of the active period of registration.
Can a professional corporation sell or transfer ownership in New Jersey?
Yes, a professional corporation can sell or transfer ownership in New Jersey with the proper procedures to maintain professional licensure.
Are foreign professional corporations allowed to conduct business in New Jersey?
Yes, foreign professional corporations are allowed to conduct business in New Jersey with a certificate of authority approved by the New Jersey Division of Revenue.
Can a shareholder of a professional corporation in New Jersey also be an employee?
Yes, a shareholder of a professional corporation in New Jersey can also be an employee.
Can I form a professional corporation online in New Jersey?
No, a professional corporation cannot be formed entirely online in New Jersey. The required documents and forms must be delivered to the New Jersey Division of Revenue in person or by mail.
What is a professional corporation in New Jersey?
A professional corporation is a type of business entity that is formed for specific professions in New Jersey, such as lawyers, accountants, and dentists.
What are the requirements for forming a professional corporation in New Jersey?
The requirements for forming a professional corporation in New Jersey include filing articles of incorporation with the New Jersey Division of Revenue, obtaining a certificate of incorporation, and complying with the specific regulations for each profession.
What types of professions are eligible to form a professional corporation in New Jersey?
Professions such as accountants, engineers, architects, lawyers, and dentists, among others, can form a professional corporation in New Jersey.
Do I need a lawyer to form a professional corporation in New Jersey?
Although it is possible to form a professional corporation in New Jersey without a lawyer, it is highly recommended to seek legal advice to ensure compliance with all regulations and requirements for the specific profession.
What are the steps to filing articles of incorporation for a professional corporation in New Jersey?
The steps to filing articles of incorporation for a professional corporation in New Jersey include choosing a name, selecting a registered agent, and filing the necessary forms and documents with the New Jersey Division of Revenue.
What type of business structure is most appropriate for a professional corporation in New Jersey?
A professional corporation is the most appropriate business structure for professionals in New Jersey who require limited liability protection, centralized management, and the ability to raise capital more easily.
How is the income of a professional corporation in New Jersey taxed?
The income of a professional corporation in New Jersey is taxed at a flat rate of 9% for corporations, in addition to any applicable federal income taxes.
Can a professional corporation be owned by non-professionals in New Jersey?
In New Jersey, professional corporations must be owned and controlled by licensed professionals, except in the case of certain minority shareholders.
Can a professional corporation in New Jersey convert to another business structure?
A professional corporation in New Jersey can be converted to another business structure, such as a Limited Liability Company (LLC) or a General Partnership, through a process known as a conversion.
What is the difference between a professional corporation and a limited liability company in New Jersey?
While both types of business structures provide limited liability protection for owners in New Jersey, a professional corporation is specifically designed for licensed professionals, while an LLC is a more general business structure.
What are the advantages of choosing a professional corporation over a traditional business structure in New Jersey?
The advantages of choosing a professional corporation in New Jersey include liability protection, centralized management, and the ability to raise capital by selling ownership shares.
Can a professional corporation in New Jersey be owned by a partnership?
No, a professional corporation in New Jersey cannot be owned by a partnership. Professional corporations can only be owned and controlled by licensed professionals.
How many shareholders can a professional corporation have in New Jersey?
The number of shareholders a professional corporation can have in New Jersey will depend on the specific regulations for each profession, but typically ranges from a handful to dozens.
What happens if a licensed professional leaves a professional corporation in New Jersey?
If a licensed professional leaves a professional corporation in New Jersey, the corporation is required to notify the appropriate licensing board and may have to amend or dissolve its articles of incorporation.
Does a professional corporation in New Jersey have to file an annual report?
Yes, professional corporations in New Jersey must file an annual report with the New Jersey Division of Revenue, which includes updated information about shareholders, officers, and other details.
What are the ongoing compliance requirements for operating a professional corporation in New Jersey?
The ongoing compliance requirements for operating a professional corporation in New Jersey will depend on the specific regulations for each profession, but typically include regular reporting to the appropriate governing boards and maintaining proper insurance coverage.
What are the restrictions on transferring ownership of a professional corporation in New Jersey?
The transfer of ownership in a professional corporation in New Jersey will depend on the specific regulations for each profession, but generally requires approval from the appropriate governing boards and may require additional procedures.
Can a professional corporation in New Jersey have a DBA (doing business as) name?
Yes, a professional corporation in New Jersey can have a DBA (doing business as) name, as long as it is properly registered and not misleading.
What are the risks of non-compliance for a professional corporation in New Jersey?
The risks of non-compliance for a professional corporation in New Jersey can include legal and financial penalties, loss of license for professionals, and damage to the corporation’s reputation.
Is it mandatory for a professional corporation in New Jersey to carry professional liability insurance?
In New Jersey, professional liability insurance is often mandatory for licensed professionals, particularly in professions like law, medicine, and accounting.
Can a professional corporation in New Jersey be voluntarily dissolved?
Yes, a professional corporation in New Jersey can be voluntarily dissolved by vote of the shareholders, as long as there is proper notice and compliance with all applicable regulations and procedures.
Will a professional be personally liable for the debts of a professional corporation in New Jersey?
No, licensed professionals are typically protected from personal liability for debts of the professional corporation in New Jersey, but there may be certain exceptions in cases of negligence or fraud.
What are the fees associated with forming a professional corporation in New Jersey?
The fees associated with forming a professional corporation in New Jersey will vary depending on the specific profession, but can include filing fees, attorney fees, and annual taxes.
Can a professional corporation in New Jersey still be sued for malpractice?
Yes, a professional corporation in New Jersey can still be sued for malpractice, as well as the licensed professionals who provide the services.
What is the minimum capital required to start a professional corporation in New Jersey?
The minimum capital required to start a professional corporation in New Jersey will depend on the specific profession and the size of the corporation, but generally ranges from a few thousand to tens of thousands of dollars.
What is the process for changing the name of a professional corporation in New Jersey?
The process for changing the name of a professional corporation in New Jersey typically involves amending the articles of incorporation and filing the necessary paperwork with the New Jersey Division of Revenue.
What is a foreign professional corporation in New Jersey?
A foreign professional corporation in New Jersey is a corporation that is registered in another state but doing business in New Jersey. These corporations must comply with all applicable regulations and requirements in order to operate in New Jersey.

Also Read

How to Save Money While Forming New Jersey Professional Corporation

First and foremost, do your research. Before starting the process of forming your professional corporation, take the time to research the various options available to you. There are different types of professional corporations in New Jersey, each with its own set of requirements and costs. By understanding the ins and outs of each, you can make an informed decision that suits your needs and budget. Additionally, consider seeking advice from professionals or mentors who have experience in forming professional corporations in New Jersey. Their insights and advice can help you avoid costly mistakes and streamline the process.

When it comes to paperwork and documentation, do not cut corners. While it may be tempting to save money by handling the paperwork yourself, this can lead to errors and delays that could end up costing you more in the long run. Consider hiring a professional service or attorney to assist you with the formation process. While this may incur an upfront cost, it can save you time and money by ensuring that all the necessary paperwork is filed correctly and expediently.

Another way to save money on forming your professional corporation is to carefully consider your business structure and needs. For example, you may be able to save money by opting for a more simple corporate structure rather than a complex one with unnecessary bells and whistles. Additionally, prioritize your business needs and allocate your budget accordingly. Do not overspend on fancy office spaces or equipment that may not be essential to the success of your business. By focusing on what is truly necessary, you can build a solid foundation for your professional corporation without breaking the bank.

Furthermore, explore cost-effective options for obtaining the necessary licenses and permits for your professional corporation. Shop around for the best rates and consider joining industry-specific organizations that offer discounts or benefits for new members. Additionally, consider applying for grants or loans that are specifically designed for startups in New Jersey. These resources can provide much-needed financial support in the early stages of forming your professional corporation.

Lastly, do not underestimate the power of networking and building relationships in the business community. By establishing connections with other professionals, you may be able to find cost-effective solutions for various aspects of forming your professional corporation. Whether it is finding a reliable accountant or negotiating a better deal with a service provider, the relationships you build can help you save money and navigate the complexities of forming a professional corporation in New Jersey.

In conclusion, forming a professional corporation in New Jersey does not have to break the bank. By doing thorough research, seeking advice from professionals, carefully considering your business needs, and exploring cost-effective options, you can save money while laying the foundation for a successful venture. With careful planning and practical decision-making, you can form your professional corporation with financial efficiency and confidence.

Conclusion

New Jersey Professional Corporation can offer several benefits for licensed professionals. However, it is essential to carefully consider the proper structure and compliance requirements before proceeding. Seeking professional guidance in forming a professional corporation can help ensure a smooth process and enable professionals to focus on providing their services. Visit LLCBase for more information about starting a professional corporation in New Jersey.

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