Starting a business may be daunting, but if you have a good idea and are willing to work your butt off, it might be worth the risk. As the market continues to change, many individuals are taking their economic fate into their own hands by starting up a business. New Jersey happens to have the 3rd fastest startup growth rate in the U.S., and 8th largest economy—making it one of the most ideal states to try your hand at entrepreneurship.
Once you have an idea, what do you do next? Here are some steps and important information:
STEP 1: Decide the Name
- Unique but Familiar. You want your business to stand out with a new and interesting name that is unique to your particular business. What you don’t want is a name that is too long or difficult for customers to pronounce or understand—or a misleading name. At this point start to think about branding and if your name can pair well with a logo.
- Search the Web. Don’t hesitate to do a web search to see what’s out there! If the name you really want is similar to one that’s already out there, you might want to try something different so your business doesn’t get confused with already existing ones.
- Do a trademark search. Search the US Patent and Trademark Office (USPTO) to see if your idea or business name is available.
- NJ Name Search. Make sure your desired business name is available by searching the NJ Business Entity Database through a name search. NJ will reject your business’s name if it already exists! Also try names that are like yours but spelt differently (EX: For Cool Cats also search Cool Catz) because the state may reject your business’s name if it is too similar.
STEP 2: Decide the Structure
There are 3 basic options for businesses. It is important to decide which one is best for your specific situation:
- A “Doing Business As” (DBA) is a business that is not separate from its owner. This means that the owner is personally liable (the owner could lose their personal property—house, cars, other personal assets, if the business were to be sued) for the company and its debt. All income is added on the owner’s personal tax returns. If there is more than one owner, then the business is classified as a “General Partnership.”
- A Corporation is a separate legal entity than the owner. This means that owners would not be held personally liable in a lawsuit. However, a corporation is a more complex business structure that includes shareholders, directors, and officers. In order to set up a corporation the owner would have to elect directors and provide Corporate Bylaws—rules for operating your corporation—which include how your business will run and for what purposes. A business does not have to be incorporated in the state it will operate, so it’s important to consider different pros and cons of a given state’s corporate laws. Finally, operating a corporation requires at minimum holding a yearly Directors and Shareholders meeting and keeping records.
- A Limited Liability Company (LLC) is a newer business structure that has gained a lot of popularity. An LLC is also a separate legal entity but is easier to manage than a corporation. There is no stock associated with an LLC and the owners are called “members.” An operating agreement sets the rules for operating the company and can be modified as the business changes and grows.
When deciding what business structure would be best suit your business idea, consider consulting with an attorney that can walk you through specific requirements and ultimately help register the business. Each of these entities has unique tax implications which one of our attorneys can walk you through as well.
STEP 3: Register the Business
Once you decide on your business structure, next you have to register the business. Each of the previously mentioned business structures has different requirements.
- Forming a DBA in NJ
- Make sure your desired business name is not already taken
- Register your name with the New Jersey Department of Revenue & Enterprise Services
- Forming a Corporation in NJ (Similar to LLC but documents will be different)
- Complete a Public Records Filing with the New Jersey Department of Treasury, Division of Revenue & Enterprise Services
- Hire or designate a Registered Agent
- File a Certificate of Formation with the New Jersey Division of Revenue and Enterprise Services
- Hold an Organizational Meeting—Shareholders and Directors present
- Forming an LLC in NJ
STEP 4: Get Your EIN
- An Employer Identification Number (EIN) is like a Social Security number for your business. This is required for Corporations and LLCs, and only required for DBA’s if your business does not have employees.
- To obtain an EIN apply online with the IRS or by sending a IRS Form SS-4.
STEP 5: Open a Business Bank and Credit Account
- Business Accounts. Ideally, its best to keep business and personal expenses separate by creating separate accounts for managing your business.
- Business Credit. For a corporation or LLC you will be required to build a company credit profile by getting business credit cards—building credit allows your business to obtain loans. To set up a business credit card, contact your chosen bank to ask what they require. Usually, you will need filed paperwork, your EIN, an a business resolution authorizing your business to open the account.
STEP 6: Set Up Accounting
- An accounting system helps your track the performance of your business and simplifies annual tax filings. This would be a record of incoming and outgoing finances for each year your business is in operation.
STEP 7: Get Permits & Licenses
- In order to run your business, you will need to obtain a business license for your specific business type that authorizes your business to operate in your city or county. Search your specific business type here to determine what is required.
- Make sure you are registered for state taxes and permits as your city may require them as a part of the business licensing process.
- General Liability Insurance. Ideal for small businesses and can cover anything from product liability to machinery used for the business.
- Workers Compensation Insurance. In New Jersey, business with one or more employees (which includes members and officers) are required by law to have workers compensation insurance.
- Professional Liability Insurance. This is for business selling professional advice or services, like consulting an accounting, should have professional liability insurance.
STEP 8: Get Business Insurance
STEP 9: Focus on Branding and Marketing
- Define YOUR Brand. What does your business stand for? How do you want people to feel about your business and product? Capitalizing on your answers to this question can ensure stability and success in your business. Having a memorable brand will keep customers coming back and spread the word.
- Create a Logo. Consider creating a logo. Try this free logo maker. Or try reaching out to someone you know who has an artistic hand to create and image to be associated with your business that can later be used on merchandizing and marketing plans.
- Marketing Plan. How will you advertise your business? How much money do you want to put into advertising your business? Think locally and then expand. The internet is also a great tool to get the word out quickly and at little to no costs. Consider Social Media Marketing Campaigns where you post about your business and get friends and family to share your exciting news to spread the word.
STEP 10: Don’t Forget to Have a Web Presence
Establishing web presence is a must. This will ensure fast and affordable coverage and allows your customers to share their experience with you and others looking to buy from you.
- Professional Website. A website allows potential customers to find your business online and discover the products you offer. This is your direct message to future customers about your businesses and products or services you provide. Important details about your business should also be found here like locations, hours of operation, and contact information.
- Social Media Profiles. In addition to posting on Social Media sites, create a Facebook page, Instagram profile, Twitter handle for your business. This allows you to share news with customers quickly and lets customers share with their friends and family.
- Accounts on Review Sites. Make your business an account on Yelp or Google Reviews. These are highly used sites that future customers may be checking to see how well-rated or liked your business is. Might as well get ahead of the curve and create your profile and encourage pleased customer to post their reviews to help your startup out.
There’s a lot to consider when starting your business, so having a plan and considering the above steps may make starting your business manageable. In today’s world, an important component of businesses will be its ability to go online. Still hesitant? Check out Indeera’s and Claude’s stories about running a business during COVID.
Aleksandra Syniec, a second-year law student at Seton Hall University School of Law. She is also knowledgeable in landlord-tenant law and information technology.