Setting Up a Business Partnership in New Jersey

Decide between a general partnership, limited partnership (LP), or limited liability partnership (LLP). This decision affects personal liability, tax treatment, and management structure. General partnerships offer simplicity but unlimited liability for all partners. LPs protect limited partners from liability but require at least one general partner with unlimited liability. LLPs offer liability protection for all partners but have more regulatory requirements and are typically used by professionals like attorneys and accountants in New Jersey.

Choose a unique business name that complies with New Jersey naming requirements. Verify availability by searching the New Jersey Division of Revenue and Enterprise Services business name database. Ensure the name doesn't infringe on existing trademarks or business names. Consider securing a domain name that matches your business name for future web presence.

Create a comprehensive agreement that outlines the rights and responsibilities of all partners, profit and loss allocation, decision-making processes, dispute resolution procedures, and partnership dissolution terms. While not legally required in New Jersey, a written partnership agreement is strongly recommended to prevent future disputes and establish clear operating procedures. Include provisions for adding or removing partners, capital contributions, and distribution schedules.

Create a document detailing each partner's initial and ongoing capital contributions to the partnership. Specify the type of contributions (cash, property, services), valuation methods for non-cash contributions, timing of contributions, and how capital accounts will be maintained. Include provisions for additional capital calls if needed and consequences for failure to make required contributions.

For limited partnerships or LLPs in New Jersey, file the appropriate certificate with the Division of Revenue and Enterprise Services. General partnerships are not required to file formation documents in New Jersey but may choose to file a Statement of Partnership Authority. LPs must file a Certificate of Limited Partnership, and LLPs must file a Statement of Qualification. Filing fees vary by partnership type.

Apply for an EIN from the Internal Revenue Service (IRS), which serves as your partnership's federal tax ID number. This is required for partnerships even if you don't have employees. Apply online through the IRS website for immediate processing or by mail using Form SS-4. There is no filing fee for obtaining an EIN.

If operating under a name different from the legal partnership name or partners' surnames, file a Trade Name Certificate (also known as a DBA or 'doing business as') with the county clerk's office in each county where you'll conduct business. Publication requirements vary by county in New Jersey, so check local regulations. Fees typically range from $50-$100 depending on the county.

Research and apply for all necessary state, county, and municipal business licenses and permits. Requirements vary based on your location and business activities in New Jersey. Check with the NJ Division of Consumer Affairs for professional licensing requirements and your local municipality for zoning permits, health department permits, or other local requirements.

Register with the New Jersey Division of Taxation for applicable state taxes. Partnerships must register for New Jersey tax purposes using the NJ-REG form. Depending on your business activities, you may need to register for sales tax, employer withholding tax, or other specialized taxes. Most businesses can register online through the NJ Division of Revenue's website.

If your partnership will sell taxable goods or services in New Jersey, apply for a Sales Tax Certificate of Authority (Form NJ-REG). This registration authorizes your business to collect sales tax from customers and remit it to the state. New Jersey's current sales tax rate is 6.625%, though some areas may have additional local taxes. Failure to collect and remit sales tax can result in significant penalties.

Establish a separate bank account for your partnership to maintain separation between business and personal finances. Bring your EIN, partnership agreement, and certificate of partnership (if applicable) to the bank. All partners may need to be present depending on the bank's requirements. Prepare a bank resolution authorizing specific individuals to conduct banking activities on behalf of the partnership.

Document day-to-day operational procedures, including accounting practices, record-keeping requirements, meeting schedules, reporting procedures, and internal controls. While some of these elements may be in your partnership agreement, more detailed procedures help ensure consistent operations and compliance with New Jersey business regulations. Include procedures for handling client funds, document retention, and financial reporting.

Draft an agreement that outlines what happens to a partner's ownership interest in case of death, disability, retirement, or voluntary departure. This document is crucial for business continuity and should include valuation methods, funding mechanisms (such as life insurance), and transfer restrictions. Consider including right of first refusal provisions and installment payment options to make buyouts financially feasible.

Secure appropriate insurance coverage for your partnership, which may include general liability, professional liability, property, business interruption, and workers' compensation insurance. New Jersey requires workers' compensation insurance for businesses with employees. Consider partner life and disability insurance to fund buy-sell agreements. Work with an insurance broker familiar with New Jersey requirements.

If hiring employees, register with the New Jersey Department of Labor and Workforce Development for unemployment insurance and disability insurance. New Jersey also has specific requirements for employee recordkeeping, wage payment, paid sick leave, and family leave. Post all required state and federal employment notices in your workplace. New Jersey has one of the most comprehensive paid leave programs in the country.

Set up systems to maintain required business records, including financial statements, tax documents, meeting minutes, and partnership decisions. New Jersey partnerships must maintain certain records for tax purposes and to support their annual partnership tax filings. Implement a secure document management system that allows for appropriate access while protecting sensitive information.

Create a calendar of recurring compliance requirements including annual reports, tax filings, license renewals, and required meetings. New Jersey partnerships must file annual reports and partnership tax returns. Set up reminders for these deadlines to avoid penalties and maintain good standing. Consider using compliance software or working with a professional to ensure nothing is missed.