How to Form a Professional Corporation in New Jersey (2024 Guide)


Steve Bennett
Steve Bennett
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Forming a Professional Corporation in New Jersey

If you would like to start and learn how to form a corporation in New Jersey, there are a few things that you should do now. However, in a professional corporation, professionals must create a special organizational structure to establish a professional or service corporation. Among the appropriate professions to organize a professional corporation in New Jersey are accountants, physicians, engineers, architects, and attorneys.

Forming a professional corporation in New Jersey or any business organization needs a certain number of steps. In this article, Webinarcare Editorial Team is going to share those steps. Keep in mind that these are general procedures. Depending on local law, it may be modified. For instance, your professional corporation may be subject to city or county-based rules.

What is a Professional Corporation in New Jersey?

A professional service corporation (PSC), often known as a professional corporation (abbreviated as PC), is a particular type of organization that is permitted by state law to allow owners of specifically licensed professions to practice in the New Jersey. A professional corporation’s owner is answerable for their own negligence or wrongdoing but is not held personally liable for the actions of other owners. The abbreviation PC or P.C. is frequently used to denote professional corporations.

This structure allows professionals to enjoy some of the benefits and protections of a traditional corporation while maintaining their professional status and abiding by the regulations of their respective licensing boards.

LegalZoom is the recommended corporation formation if you are thinking of forming a professional corporation from scratch. However, you can always start an LLC in New Jersey, if you changed your mind.

WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in New Jersey

To form a Professional Corporation in New Jersey for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Registered Agent, filing the Certificate of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an Annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in New Jersey, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

To provide your service, you must be qualified and have a license. In most cases, you can now form a professional corporation after finishing your studies, passing the exam, and receiving your license. If you work in an industry that does not provide a license or professional certification, you should consider starting an LLC or corporation.

Step 2: Name your Professional Corporation in New Jersey

After you have decided to form a professional corporation in New Jersey, you must choose a name for your corporation. Here are some pointers to consider when naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • Limit of restricted words that need a license.
  • A unique name is needed with no match
  • No confusion with a government entity name.

In New Jersey, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 120 days. You must file a name reservation application in the New Jersey Secretary of State to keep the name.

If not already present, a professional corporation, professional association, service corporation, or professional service corporation must be included in the name. You may register your business under a different legal name if your preferred legal name is unavailable. Once you’ve decided on a name, you can apply for New Jersey DBA (doing business as). This way, you can run a clinic or law firm under your name.

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Step 3: Choose the New Jersey Registered Agent

The next step in forming a professional corporation is hiring a Registered Agent, who accepts legal paperwork for your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in New Jersey. Forming a professional corporation for your service will be easier if you have Registered Agent in New Jersey.

Alternatively, you can serve as your own Registered Agent if you have the time. Usually, in New Jersey, a Registered Agent costs is ranging from $50 – $200. To make it easier, you can hire New Jersey Registered Agent Services for your professional corporation.

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Step 4: File the Certificate of Incorporation in New Jersey

After you hire a Registered Agent to form a professional corporation, the next step is to file the New Jersey Certificate of Incorporation. In writing the Certificate of Incorporation, the business name, owner’s contact information, corporation address, and Registered Agent contact information, should be written. Include the names of all co-owners as well. All owners must demonstrate that they have the necessary licenses to practice the profession in question.

Filing the Certificate of Incorporation in New Jersey may be done with four methods that are online, fax, by mail and in-person. The Certificate of Incorporation fee may vary from different state. However, in New Jersey, it costs $125 for filing online, by mail, or in person. Create an account/Log in to the SOS site, get the online form, fill it, and submit online. For offline filing, Send the form by mail or drop it off in person at New Jersey Division of Revenue, P.O. Box 308, Trenton, NJ 08646..

Step 5: Write an Operating Agreement in New Jersey

An operating agreement in New Jersey is a document that contains all of your company’s organizational details. It is optional to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The operating agreement includes information like-

  • About Business
  • Members and management
  • Capital contribution
  • Profit Distribution
  • Change of membership
  • Dissolution

Step 6: Designate the PC Board of Directors in New Jersey

The next step is to form the first board of directors for your PC in New Jersey. All of the initial directors must provide the owner with their contact information. The owner must keep records and submit them by the New Jersey Secretary of State. As a shareholder and owner, you must ensure that a provision for appointing a new director is included in the By-laws. In New Jersey, you must have Three directors in forming your Professional Corporation.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

Creating comprehensive corporate bylaws requires specific knowledge about the company, its structure, and operations. However, I can provide you with a general outline of what corporate bylaws usually include. It is crucial to consult with New Jersey Business Attorney or a legal expert to ensure that your bylaws comply with the laws and regulations governing your jurisdiction and industry.

  • Name and Purpose of the Corporation
  • Registered Office and Agent
  • Shareholders
  • Board of Directors
  • Officers
  • Committees
  • Indemnification and Insurance
  • Conflict of Interest
  • Records and Reports
  • Amendments
  • Miscellaneous

Step 8: Hold the First Board of Directors’ Meeting

Gather the board of directors for the first meeting after drafting the corporate bylaws. This meeting will conclude with the appointment of directors to manage the company’s daily operations, approval of the bylaws, selection of the corporation’s financial reporting year, and approval of the stock issue. Minutes should be taken at all board meetings and kept with the company’s records.

Step 9: Request an EIN in New Jersey.

After the operating agreement’s documentation, you should get or request an Employer Identification Number (EIN) in New Jersey. The tax ID for your professional corporation will be an EIN. The Internal Revenue Service can provide an EIN (IRS). It has nine digits and is comparable to a social security number. Nevertheless, EIN is different from SSN. Only business-related tasks, primarily filing general taxes, are performed using it. The form needs to be filled out and submitted online to the IRS.

The application of an EIN in New Jersey can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in several ways. It will give your professional corporation the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

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Step 10: Open a Bank Account and Prepare for Taxes.

You should open a business bank account as soon as you have applied for and received your Employer Identity Number because you will use this account for yourself, your clients, and your staff. Check out the Best Banks in New Jersey for you to decide on which bank you are going to open an account.

Due to your organization’s increased legality and liquidity, having a US business bank account may make conducting business in New Jersey easier. Most banks require an EIN for businesses other than sole proprietorships to open a business bank account. Also, keeping your accounts separate will prevent you from merging your personal and business finances. Also, filing taxes is simpler when you have an EIN. You can expect to pay employee and corporate taxes when you form a professional corporation.

Step 11: Get a Business License in New Jersey

Before your professional corporation operates in New Jersey, you must have New Jersey Business License first. A business license is a formal document issued by a state government agency that allows you to conduct business in the geographic area governed by that agency. The cost of business licenses and permits in New Jersey ranges from $50 – $300. You must check with the local authorities to see if any special licenses or permits are required.

Step 12: File Your Taxes in New Jersey

Finally, you’ve arrived at the final process. Remember to file your taxes when you have obtained a business license and are ready to begin operations. To avoid a large tax bill, you should begin paying taxes quarterly as soon as possible. Each state has different tax requirements. Start examining the New Jersey tax classification for the taxes that an LLC in New Jersey must pay.

Main Characteristics of a Professional Corporation

In forming a Professional Corporation, the main characteristics must be distinguished before forming it. These are the general characteristics of forming a Professional Corporation in New Jersey.

  • Limited Liability Protection: A professional corporation provides its owners, shareholders, or members limited liability protection like a regular corporation. This means the shareholders’ personal assets are generally protected from business debts, obligations, and lawsuits, except in malpractice or professional negligence cases.
  • New Jersey Licensing Requirements: All shareholders must typically be licensed professionals in the same field in a professional corporation. The corporation must also comply with specific state regulations and licensing requirements that govern the profession.
  • Governance and Management: A professional corporation is governed by a board of directors, who the shareholders elect. The board appoints officers to manage the day-to-day operations of the corporation. All directors and officers must be licensed professionals in the same field as the corporation.
  • Taxation: Professional corporations are taxed as C corporations, where the corporation pays taxes on its income, and shareholders pay taxes on dividends received from the corporation. However, some professional corporations may be eligible for S corporation status, allowing pass-through taxation. Income, losses, deductions, and credits flow to the shareholders, who report this information on their income tax returns.
  • Restrictions on Ownership and Transfer of Shares: Professional corporations often restrict the ownership and transfer of shares to ensure that only licensed professionals in the same field can become shareholders. This helps maintain the professional nature of the corporation and adheres to state licensing requirements.
  • Malpractice Liability: While a professional corporation provides limited liability protection for general business debts and obligations, it does not shield shareholders from liability for their own malpractice or professional negligence. Shareholders can still be personally liable for their actions in providing professional services.

In summary, a professional corporation is a specialized corporate structure designed for licensed professionals, offering limited liability protection and a formal governance structure while adhering to state licensing requirements and regulations.

Maintain Professional and Business License in New Jersey

You must maintain or renew your professional license regularly now that you have established your professional corporation. Even if your company is well-established, it is only meaningful if you have a valid operating license. And it makes no difference if your professional license is still valid for a year or two, but your business license has already expired.

Make time at least once a year to check the status of your licenses. You won’t miss anything important this way. You can address any issues that arise.

Filing Annual Report in New Jersey

In New Jersey, you must submit a report. The owners’ and Registered Agent’s names and contact details are listed in the Annual Report. Also, it should include all of your yearly financial activity. You must submit the report every 1 year (end of the anniversary month) in the New Jersey Secretary of State.

FAQs

What is a professional corporation?
A professional corporation, or PC, is a type of corporation that is organized to provide professional services in fields such as law, medicine, accounting or engineering.
Is a professional corporation recognized in New Jersey?
Yes, New Jersey recognizes professional corporations.
What can be the name of a professional corporation in New Jersey?
The name of the professional corporation in New Jersey must include the words “professional corporation,” “professionals corporation,” “P.C.,” or “PC.”
Can one or more licensed professionals form a professional corporation in New Jersey?
Yes, one or more licensed professionals can form a professional corporation in New Jersey.
What professionals can form a professional corporation in New Jersey?
In New Jersey, professions that can form a professional corporation include dentists, doctors, chiropractors, podiatrists, lawyers, accountants, and architects.
What is the process for forming a professional corporation in New Jersey?
The process for forming a professional corporation in New Jersey involves submitting articles of incorporation and obtaining the necessary licenses.
Where do I file articles of incorporation for a professional corporation in New Jersey?
Articles of incorporation for a professional corporation in New Jersey are filed with the New Jersey Division of Revenue.
What are the filing fees for forming a professional corporation in New Jersey?
The filing fee for articles of incorporation in New Jersey is $125.
Does New Jersey require a minimum capitalization for professional corporations?
No, New Jersey does not require a specific amount of capitalization to form a professional corporation.
What type of liability protection does a professional corporation offer?
A professional corporation offers limited liability protection to its shareholders.
How is a professional corporation taxed in New Jersey?
A professional corporation is taxed as a separate legal entity by the New Jersey Department of Treasury.
Are there specific bylaws for professional corporations in New Jersey?
Yes, there are specific bylaws and governance requirements for professional corporations in New Jersey.
How many directors are required for a professional corporation in New Jersey?
A professional corporation in New Jersey must have at least one director.
Are shareholders required to be licensed professionals in New Jersey?
Yes, all shareholders must be licensed professionals in their respective fields in New Jersey.
How can I obtain a license for a professional corporation in New Jersey?
Each licensed professional who will be involved in the professional corporation must obtain the necessary licenses from the State of New Jersey.
Can two different licensed professions form a professional corporation in New Jersey?
No, professional corporations in New Jersey can only be created by members of the same profession.
Can a professional corporation provide non-professional services?
No, professional corporations can only provide professional services relevant to their licensed profession in New Jersey.
Can non-licensed employees be shareholders in a professional corporation in New Jersey?
Yes, non-licensed individuals can be shareholders in a professional corporation in New Jersey, but they cannot vote or control the decision-making of the corporation.
Can shareholders in a professional corporation in New Jersey be held liable for the actions of their co-shareholders?
No, shareholders are generally not personally liable for the actions of their co-shareholders in a professional corporation in New Jersey.
Is a professional corporation required to carry liability insurance in New Jersey?
Yes, it is highly recommended for professional corporations in New Jersey to carry liability insurance.
Can a professional corporation in New Jersey be dissolved by one of the shareholders?
No, a professional corporation in New Jersey can only be dissolved by a court order or through the vote of a majority of shareholders.
What happens to a professional corporation when a shareholder dies or retires?
The professional corporation may continue to operate with the remaining shareholders if they choose to do so, or it may be dissolved and the assets distributed to the shareholders.
Can a professional corporation merge with another professional corporation in New Jersey?
Yes, professional corporations in New Jersey can merge with other professional corporations as long as they are of the same licensed profession and meet the legal requirements.
Does New Jersey require professional corporations to hold regular shareholder meetings?
Yes, New Jersey requires professional corporations to hold regular meetings of shareholders.
How often does a professional corporation have to file its business records with the state in New Jersey?
New Jersey requires professional corporations to file business records annually.
Can a professional corporation be sued in New Jersey?
Yes, a professional corporation can be sued in New Jersey just like any other corporation.
Can a shareholder in a professional corporation in New Jersey be personally liable for acts of malpractice or negligence?
Yes, a shareholder may be personally liable for acts of malpractice or negligence that they personally commit in the practice of their profession, even though they are protected by limited liability due to their corporate status.
Is a professional corporation allowed to provide its services in other states outside of New Jersey?
Yes, as long as the business obtains any necessary licenses in those other states.
Does a professional corporation get taxed differently if it has only one licensed professional shareholder or multiple licensed professional shareholders in New Jersey?
No, the professional corporation is taxed as a separate legal entity regardless of how many licensed professional shareholders it has in New Jersey.
Who can form a professional corporation in New Jersey?
Professionals who are licensed or registered with their respective New Jersey state board can form a professional corporation.
What are the benefits of forming a professional corporation in New Jersey?
Some benefits are tax benefits, limited personal liability, and the ability to conduct business with a more formalized structure.
How do I register a professional corporation in New Jersey?
You will need to file articles of incorporation with the New Jersey Division of Revenue.
What is the registration fee for forming a professional corporation in New Jersey?
As of 2021, the registration fee is $125.
What documents do I need to form a professional corporation in New Jersey?
You will need to file articles of incorporation and potentially other related forms with the New Jersey Division of Revenue.
How long does it usually take to form a professional corporation in New Jersey?
The processing time for forming a professional corporation in New Jersey is approximately 1-2 weeks.
Can a professional corporation in New Jersey be owned by a non-professional?
No, in New Jersey, a professional corporation must be owned by licensed or registered professionals.
What is the organizational structure of a professional corporation in New Jersey?
The organizational structure of a professional corporation in New Jersey is similar to that of a regular corporation, with the inclusion of shareholder, officer, and director roles specific to the professional corporation.
Is there a limit to the number of professionals who can form a professional corporation in New Jersey?
No, there is no limit to the number of professionals who can form a professional corporation in New Jersey.
Are there any restrictions on the business activities a professional corporation can engage in New Jersey?
Yes, a professional corporation may only engage in the profession for which it is organized.
Are there any requirements for maintaining a professional corporation’s corporate records in New Jersey?
Yes, a professional corporation is required to maintain adequate records for at least seven years.
What is the minimum number of shareholders required to form a professional corporation in New Jersey?
In New Jersey, professional corporations may be formed with one or more shareholders.
Are shareholders in a professional corporation in New Jersey personally liable for the company’s debts and obligations?
Generally, no. Shareholders have some limited liability protection, and their personal assets are usually not available to satisfy the corporation’s debts and obligations.
Can a professional corporation in New Jersey have only one owner/shareholder?
Yes, a professional corporation in New Jersey may have only one owner/shareholder.
What is the difference between a professional corporation and a regular corporation in New Jersey?
The main difference is that a professional corporation is specifically designed for professionals who may be restricted by state licensing laws. They have specific shareholders, officers, and directors as opposed to the standard shareholders, officers, and directors typical of a regular corporation.
Can a professional corporation in New Jersey have multiple professionals from different professions?
No, in New Jersey, a professional corporation can only include professionals from the same profession.
What is a certificate of registration for a professional corporation in New Jersey?
A certificate of registration is a legal document provided by the New Jersey Division of Revenue and confirms the existence of a professional corporation.
Can a professional corporation in New Jersey provide services outside of the state?
Yes, a professional corporation can provide services outside of New Jersey but must still adhere to regulations applicable to the particular state in which its services are rendered.
What is an authorized professional service corporation in New Jersey?
An authorized professional service corporation is a specific type of professional corporation that satisfies additional requirements and authorizes professionals such as certified public accountants to provide certain services.
Is there a limit to the number of shareholders in an authorized professional service corporation in New Jersey?
Yes, an authorized professional service corporation in New Jersey can have up to 35 shareholders.
What is a Notice of Election for authorized professional service corporations in New Jersey?
A Notice of Election is a legal document submitted to the appropriate New Jersey board that elects to become an authorized professional service corporation.
Does a professional corporation have to file annual reports in New Jersey?
Yes, each calendar year an annual report is required. This is filed with Division of Revenue.
Can non-professionals work for a professional corporation in New Jersey?
Yes, a professional corporation can hire non-professionals for administrative and support roles.
Can a professional corporation hold real estate in New Jersey?
Yes, a professional corporation in New Jersey may hold real estate necessary for the corporation’s business activities.
Does a professional corporation have to pay for insurance or provide benefits for employees in New Jersey?
Yes. Every year insurance is renewed for the corporation. As regards employee benefits, at present, there are no specific benefit and insurance obligations that apply for New Jersey professional corporations. Nonetheless, those corporations with employees have separate obligations under New Jersey law on workers’ compensation and employment taxes.
What happens to a professional corporation in New Jersey if a shareholder of the corporation dies?
Each professional corporation has its own operating agreement, in the event there is no operating agreement and shareholder removes or dies, the distribution to the remaining shareholders depends upon their pre-determined terms.
Can a professional corporation in New Jersey convert into another entity type?
Yes, a professional corporation in New Jersey can choose to convert to a different entity, like another type corporation and company. You can discuss the options with an attorney or accountant.
Can an out-of-state professional corporation do business in New Jersey?
Yes, as long as the corporation is authorized to do business in New Jersey or follows regulations applicable to their respective operation.

Also Read

How to Save Money While Forming New Jersey Professional Corporation

One of the first steps to saving money when forming a professional corporation is to do thorough research. This includes looking into the different legal structures available in New Jersey and determining which one is the most cost-effective for your specific business needs. By taking the time to fully understand the options available to you, you can avoid unnecessary expenses down the road.

Another way to save money when forming a professional corporation is to make use of online resources. Instead of hiring an expensive lawyer to handle all of the legal paperwork, consider using online platforms that provide the necessary forms and information for a fraction of the cost. By taking advantage of these resources, you can save thousands of dollars in legal fees.

In addition to using online resources, business owners can also save money by taking advantage of free or low-cost business counseling services. These services, provided by organizations such as the Small Business Development Center, can offer invaluable guidance and support to new business owners at little to no cost. By seeking out these resources, entrepreneurs can gain valuable insights into the process of forming a professional corporation without breaking the bank.

Furthermore, business owners can save money by being strategic about their office space. Instead of leasing expensive office space in downtown centers, consider setting up shop in a more affordable location. This could mean working from home or renting a co-working space to save on overhead costs. By downsizing your office space, you can free up more money to invest in other aspects of your business.

Another way to save money while forming a professional corporation in New Jersey is to carefully consider your hiring process. While it may be tempting to hire a large team of employees right from the start, this can quickly drain your resources. Instead, consider starting small and outsourcing certain tasks until your business grows. By only hiring essential employees in the beginning, you can save on payroll expenses and avoid unnecessary financial strain.

Lastly, business owners can save money by shopping around for essential services such as insurance and banking. By comparing rates from different providers, you can find the best deals on insurance policies, bank accounts, and other financial services. Additionally, consider negotiating with vendors to see if you can secure discounts or payment plans that work within your budget. By being proactive about finding cost-effective solutions, you can save a significant amount of money while setting up your professional corporation.

In conclusion, there are many ways in which business owners can save money while forming a professional corporation in New Jersey. By doing thorough research, utilizing online resources, seeking out free business counseling services, being strategic about office space, carefully considering hiring decisions, and shopping around for essential services, entrepreneurs can cut costs without sacrificing the quality of their business. By implementing these money-saving strategies, business owners can set themselves up for success in the competitive New Jersey market.

Conclusion

In conclusion, forming a professional corporation in New Jersey is a strategic decision for licensed professionals who seek to combine their expertise and services under a single corporate entity. This business structure offers limited liability protection, a formal governance structure, and compliance with state licensing requirements. However, it also comes with certain restrictions on ownership, transfer of shares, and personal liability for professional malpractice. By carefully considering the advantages and disadvantages of a professional corporation, professionals can determine whether this structure aligns with their business goals, regulatory requirements, and risk management needs, ultimately contributing to a more organized, secure, and compliant professional practice.

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