Choosing the right business structure is a critical first step for any entrepreneur in New Jersey. While many start with an LLC or C-Corp, an S Corporation (S Corp) offers specific tax advantages that can be highly beneficial for small to medium-sized businesses. Forming an S Corp in New Jersey involves meeting specific federal and state requirements, including obtaining an Employer Identification Number (EIN) from the IRS and filing the appropriate state forms. An S Corp is not a business entity type in itself, but rather a tax election made with the IRS. This election allows a qualifying LLC or C-Corp to be taxed under Subchapter S of the Internal Revenue Code. The primary advantage is the potential to reduce self-employment taxes by allowing owners to take a "reasonable salary" as wages, subject to payroll taxes, with the remaining profits distributed as dividends, which are not subject to self-employment tax. This guide will walk you through the essentials of forming and operating an S Corp in the Garden State.
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