Starting a Business in New Jersey

A new business in New Jersey is not out of reach. So have you been wondering: how do I start a business in New Jersey? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in New Jersey during a recession?

New Business in New Jersey: Pros and Cons

Per Business Insider, New Jersey is right in the middle set of ten states to start a new business in, per a 2016 article. This is for the entire nation.  On the plus side, the state scores well for productivity and it has a $56,721 per capita GDP.

Business opportunity seems to favor business owners here more than in other states.  But its living costs are among the most expensive in the nation.

The bigger problem, though, is business taxes. It ranks the worst in that category. Property taxes in New Jersey are some of the highest in the nation. The state’s 9% corporate income tax is high as well.Being near New York and

Pennsylvania means business owners can hire people from those other states. But beware. CBS News put Trenton and Newark on its list of the ten most expensive cities to start a business in, again for the whole country. They were #9 and #10.

Max Filings said New Jersey had the worst business tax climate when it comes to starting a corporation or an LLC.

New Jersey Time of Application Clause

But maybe the most immediately beneficial New Jersey business resource is the state’s time of application clause for new business applications. These new rules now let businesses follow only the regulations applying at the time of their initial application.

This allows for increased regulatory certainty. It also helps to avoid costly setbacks which could occur when local governments adopt new regulations.

Recent Changes?

In 2018, Forbes puts New Jersey at number 38. Also in 2018, Fit Small Business clocks in New Jersey at a pretty similar number 34. Keep in mind, the three websites all have different criteria.

Forbes praises New Jersey for its number 6 quality of life. Labor supply and growth prospects are both near the middle of the pack. But the economic climate is worse than the average. And the regulatory environment and business costs (a lousy number 49!) are in the worst ten states.

Fit Small Business says New Jersey has the second-best quality of life in the country. Labor market, costs of starting a business, and access to capital are all rather good. Labor market is a measure of both the desirability of an area and the number of people with bachelor’s degrees. Startup activity is also better than average. But the cost of living is in the worst ten states. And when it comes to taxes, New Jersey is dead last.

Only you can decide if starting a business in New Jersey is worth your while. The tax environment has not gotten any better, and your business costs will be high. One thing to consider is that these rankings are likely splitting the difference among the leafy north, the industrial center, and Atlantic City and coastal towns in the south.

New Business in New Jersey: Initiatives

The Edison Innovation Fund provides programs and funding. It’s meant to “develop, sustain, and grow technology and life sciences businesses that lead to well-paying job opportunities.” Since 2006, the Fund has given hundreds of millions of dollars in support to startup technology firms across the Garden State.

Innovation Zones

In addition, there are designated Innovation Zones near research universities for more public to private collaboration. Technology companies in these zones have access to tax credits and grants. They can also get support in the form of laboratory and production space.

Technology Business Tax Certificate Transfer Program

The state’s Technology Business Tax Certificate Transfer Program lets unprofitable technology and biotechnology companies sell unused research and development tax credits to unaffiliated businesses for at least 80% of value.

In this way, companies can raise more funds for procuring equipment and facilities.

Here is how to start a new business in New Jersey.

Start a New Business in New Jersey – New Jersey New Business Secretary of State Requirements

Register a Business Name

Reserve and register a business name on the official State of New Jersey website. Check a database of New Jersey corporation names.

Go to the State of New Jersey Business Portal for information about permits and licenses.

Local Permits and Licenses

There is a list of phone numbers and links for county clerks available online.

Start a New Business in New Jersey – Business Registration

New Jersey has a useful online Business Portal to get you started. Ultimately you must register with the New Jersey Division of Revenue and Enterprise Services.

Tax Registration

Be sure to check the New Jersey Department of the Treasury or you can always register online.

Start a New Business in New Jersey – Virtual Offices

Alliance offers New Jersey virtual business office space in the following cities:

Northern New Jersey

Alliance’s northern New Jersey offices are in East Orange and Morristown. They are also in Pine Brook, and Rutherford.

Central New Jersey

Alliance’s central New Jersey offices are in Bridgewater, Mt. Laurel, and Piscataway .

Southern New Jersey

However, Alliance’s only southern New Jersey office space is in Marlton.

So go to Regus for New Jersey virtual office space in Cherry Hill, Edison, Patterson, and Toms River.

Also, go to DaVinci for New Jersey virtual business offices in these cities.

Northern New Jersey

DaVinci has space in Bayonne, East Hanover, and Englewood Cliffs. It also has offices in Hackensack, Hoboken, and Jersey City. There is more space in Montclair, Mountain Lakes, and Parsippany. It also has space Scotch Plains, Sparta, Summit, and Union City.

Central and Southern New Jersey

DaVinci offers space in Eatontown, Middletown, and Princeton. There is also space in Red Bank and Somerville. However, there is no DaVinci space in southern New Jersey.

For Atlantic City and in other parts of the state, try local business owners. Or ask computer user groups for help in this area.

Start a New Business in New Jersey – Establish Business Credit

Business credit is credit in a business’s name. It doesn’t attach to an entrepreneur’s personal credit, not even when the owner is a sole proprietor and the solitary employee of the small business.

As a result, a business owner’s business and individual credit scores can be very different.

The Benefits

Considering that business credit is distinct from consumer, it helps to safeguard a business owner’s personal assets, in case of a lawsuit or business insolvency.

Also, with two distinct credit scores, a small business owner can get two separate cards from the same merchant. This effectively doubles buying power.

Another benefit is that even startup companies can do this. Heading to a bank for a business loan can be a formula for disappointment. But building small business credit, when done correctly, is a plan for success.

Personal credit scores are dependent on payments but also various other considerations like credit usage percentages.

But for business credit, the scores actually only hinge on whether a business pays its debts on time.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

The Process

Building company credit is a process, and it does not occur automatically. A business has to actively work to establish business credit.

Having said that, it can be done readily and quickly, and it is much swifter than developing personal credit scores.

Merchants are a big component of this process.

Undertaking the steps out of sequence will cause repetitive rejections. No one can start at the top with business credit. For example, you can’t start with retail or cash credit from your bank. If you do, you’ll get a denial 100% of the time.

Start a New Business in New Jersey – Small Business Fundability

A small business has to be fundable to lending institutions and vendors.

Therefore, a business will need a professional-looking website and e-mail address. And it needs to have website hosting from a company such as GoDaddy.

Additionally, company phone and fax numbers need to have a listing on ListYourself.net.

Likewise, the business telephone number should be toll-free (800 exchange or comparable).

A company will also need a bank account devoted only to it, and it has to have all of the licenses essential for operation.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Working with the IRS

Visit the Internal Revenue Service web site and obtain an EIN for the business. They’re free of charge. Pick a business entity such as corporation, LLC, etc.

A small business can start off as a sole proprietor. But they will most likely want to change to a form of corporation or an LLC.

This is in order to minimize risk. And it will maximize tax benefits.

A business entity will matter when it involves tax obligations and liability in case of litigation. A sole proprietorship means the entrepreneur is it when it comes to liability and tax obligations. Nobody else is responsible.

Sole Proprietors Take Note

If you run a company as a sole proprietor, then at the very least be sure to file for a DBA. This is ‘doing business as’ status.

If you do not, then your personal name is the same as the company name. Hence, you can end up being directly liable for all business debts.

Plus, according to the IRS, by having this arrangement there is a 1 in 7 chance of an IRS audit. There is a 1 in 50 probability for corporations! Steer clear of confusion and substantially reduce the chances of an IRS audit as well.

Starting the Business Credit Reporting Process

Start at the D&B website and get a totally free D-U-N-S number. A D-U-N-S number is how D&B gets a company in their system, to generate a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s sites for the company. You can do this at fastcs.wpengine.com/reports. If there is a record with them, check it for accuracy and completeness. If there are no records with them, go to the next step in the process.

By doing this, Experian and Equifax will have something to report on.

Vendor Credit Tier

First you need to establish trade lines that report. This is also referred to as the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a business credit score.

And with an established business credit profile and score you can begin to obtain credit in the retail and cash credit tiers.

These types of accounts have the tendency to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But first of all, what is trade credit? These trade lines are credit issuers who will give you initial credit when you have none now. Terms are generally Net 30, rather than revolving.

Therefore, if you get an approval for $1,000 in vendor credit and use all of it, you will need to pay that money back in a set term, like within 30 days on a Net 30 account.

Details

Net 30 accounts need to be paid in full within 30 days. 60 accounts have to be paid fully within 60 days. In comparison with revolving accounts, you have a set time when you have to pay back what you borrowed or the credit you made use of.

To start your business credit profile properly, you ought to get approval for vendor accounts that report to the business credit reporting agencies. Once that’s done, you can then use the credit.

Then repay what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Vendor Credit Tier – It Makes Sense

Not every vendor can help in the same way true starter credit can. These are merchants that will grant an approval with a minimum of effort. You also need them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

You want 5 to 8 of these to move onto the next step, which is the retail credit tier. But you may have to apply more than once to these vendors. So, this is to confirm you are responsible and will pay in a timely manner.

Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move onto the retail credit tier. These are companies like Office Depot and Staples.

Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use the company’s EIN on these credit applications.

One instance is Lowe’s. They report to D&B, Equifax and Business Experian. They need to see a D-U-N-S and a PAYDEX score of 78 or better.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then progress to the fleet credit tier. These are companies such as BP and Conoco. Use this credit to buy fuel, and to fix, and take care of vehicles. Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, make certain to apply using the small business’s EIN.

One such example is Shell. They report to D&B and Business Experian. They need to see a PAYDEX Score of 78 or higher and a 411 small business phone listing.

Shell might claim they want a certain amount of time in business or profits. But if you already have sufficient vendor accounts, that won’t be necessary. And you can still get approval.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Cash Credit Tier

Have you been sensibly managing the credit you’ve up to this point? Then move onto the cash credit tier. These are service providers like Visa and MasterCard. Only use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

One example is the Fuelman MasterCard. They report to D&B and Equifax Business. They need to see a PAYDEX Score of 78 or more. And they also want you to have 10 trade lines reporting on your D&B report.

Plus, they want to see a $10,000 high credit limit reporting on your D&B report (other account reporting).

Plus, they want you to have an established business.

These are service providers such as Walmart and Dell, and also Home Depot, BP, and Racetrac. These are typically MasterCard credit cards. If you have 14 trade accounts reporting, then these are attainable.

Start a New Business in New Jersey – Monitor Your Business Credit

Know what is happening with your credit. Make certain it is being reported and deal with any errors ASAP. Get in the practice of checking credit reports and digging into the details, and not just the scores.

We can help you monitor business credit at Experian and D&B for 90% less than it would cost you at the CRAs. See: fastcs.wpengine.com/monitoring.

Update Your Information

Update the information if there are errors or the information is incomplete.

Fix Your Business Credit

So, what’s all this monitoring for? It’s to contest any errors in your records. Errors in your credit report(s) can be taken care of. But the CRAs generally want you to dispute in a particular way.

Disputes

Disputing credit report inaccuracies generally means you mail a paper letter with copies of any evidence of payment with it. These are documents like receipts and cancelled checks. Never mail the original copies. Always mail copies and keep the originals.

Fixing credit report inaccuracies also means you precisely detail any charges you contest. Make your dispute letter as clear as possible. Be specific about the issues with your report. Use certified mail so that you will have proof that you sent in your dispute.

A Word about Business Credit Building

Always use credit responsibly! Never borrow more than what you can pay off. Track balances and deadlines for repayments. Paying off promptly and fully will do more to increase business credit scores than just about anything else.

Establishing business credit pays off. Good business credit scores help a small business get loans. Your loan provider knows the small business can pay its debts. They understand the company is authentic.

The small business’s EIN connects to high scores and credit issuers won’t feel the need to ask for a personal guarantee.

Business credit is an asset which can help your small business in years to come.

Learn more here and get started toward opening a new business in New Jersey.

Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country.

New Jersey’s Response to COVID-19

Here’s what New Jersey is doing about COVID-19. The New Jersey Economic Development Authority (NJEDA) has a portfolio of loan, financing, and technical assistance programs available to support small and medium-sized businesses.

Currently, several state agencies are currently engaging with local business leaders, local financial institutions, and business advocacy groups to better understand what supports would be most impactful to ensure business and employment continuity.

See: New Jersey’s information for small businesses regarding the novel coronavirus.