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Introduction
If you’re a professional looking to establish a corporation in the state of New Jersey, this article will guide you through the process of forming a professional corporation. In New Jersey, professional corporations are specifically designed to be operated by licensed professionals, such as doctors, lawyers, accountants, and architects.
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I. Understand the Nature of a Professional Corporation
Before diving into the process of forming a professional corporation, it is important to grasp the unique features and benefits of this business structure.
What is a Professional Corporation?
A professional corporation is a type of legal entity that provides licensed professionals with a framework for conducting business while maintaining limited liability protection. This means that individual professionals within the corporation are not personally liable for the company's debts or legal liabilities. However, it does not protect against the professional's own malpractice or negligence.
Benefits of a Professional Corporation:
1. Limited Liability: The main advantage of a professional corporation is that it protects the personal assets of individual professionals within the corporation from lawsuits and business debts.
2. Business Credibility: Forming a professional corporation adds credibility and professionalism to the licensed professionals associated with the entity.
3. Attractive to Investors: Professional corporations are more attractive to potential investors due to the limited liability protection it provides.
4. Tax Flexibility: By default, professional corporations are taxed as C-Corporations, which can offer certain tax benefits. However, professional corporations can choose to be taxed as S-Corporations by filing an election with the Internal Revenue Service (IRS).
II. Steps to Form a Professional Corporation in New Jersey
Now that you have a clear understanding of professional corporations, let's go over the step-by-step process of forming one in the state of New Jersey.
1. Choose a Name: Select a unique and appropriate name for your professional corporation. It must not be deceptively similar to any existing corporation or violate trademark laws.
2. Professional Licenses: Ensure that all professionals involved in the corporation hold the necessary licenses issued by the appropriate licensing authority in their respective professions.
3. Appoint Registered Agent: Choose a registered agent who will receive legal and official correspondence on behalf of the corporation.
4. File the Certificate of Incorporation: Prepare and file the Certificate of Incorporation with the New Jersey Division of Revenue and Enterprise Services. Include important details, such as the corporation's name, purpose, registered agent information, etc.
5. Publish Notice: In New Jersey, within 30 days of filing the Certificate of Incorporation, you are required to publish a legal notice in two newspapers in the county where the office is located. This notice must contain specific information about the incorporators and the corporation.
6. Draft Bylaws: Create a set of bylaws that outline the internal governance of the corporation.
7. Hold an Organizational Meeting: Conduct an organizational meeting with the initial directors and officers of the corporation to adopt the bylaws, elect officers, and handle other organizational matters.
8. Apply for EIN and Register for Taxes: Obtain an Employer Identification Number (EIN) from the IRS for tax purposes. Also, register for state and local taxes, payroll taxes, and any necessary professional licensing taxes.
9. Required Licensing and Permits: Depending on your industry, obtain any required professional licenses and permits specific to your profession.
While these steps will help you form a professional corporation in New Jersey, it is crucial to consult with a qualified attorney or business advisor to ensure compliance with all legal requirements.
Conclusion
Forming a professional corporation in New Jersey offers licensed professionals numerous advantages, including limited liability protection and added credibility. By following the step-by-step process outlined in this article, you can confidently establish a professional corporation and begin operating your business with ease. Seek professional guidance when necessary, and embrace the opportunities that come with this business structure.
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