Sub-Chapter S Incorporation
NJ Sub Chapter S Incorporation Attorneys
Since 1997 our New Jersey business lawyers have been assisting clients in incorporating Sub-Chapter S corporations. There are a number of options for business owners to consider when incorporating in New Jersey. You should be familiar with all of them because they are all a little bit different.
Sub-Chapter S, or S Corporations are created after an application to the IRS is approved. Corporations may elect to register in New Jersey as a Sub-Chapter S corporation. Since the S corporation status for federal purposes does not automatically flow through for New Jersey state purposes, you must apply for S corporation status in this New Jersey and receive approval of the election. Without this filing and approval, your filings in New Jersey will be considered as those of a standard C corporation with all the rates that apply to that designation.
Advantages to Sub Chapter S Incorporation
No Corporate Taxes: Perhaps the biggest advantage to having a Sub-Chapter S corporation concerns the tax advantages. A Sub-Chapter S Corp. is exempt from federal and New Jersey corporate income tax, so that the earnings of the Corporation flow directly to the owners. To the contrary, a regular corporation is subject to federal and New Jersey corporate income taxes resulting in profits being taxed first on the corporate level and then again at the individual level of the shareholders to whom the profits are distributed.
Reduce taxable gains when selling your business. This can be part of good planning for your retirement as you’ll save considerably.
Losses incurred during start-up can be written off. These can be written off against your personal income.
Protection of assets. S corporations offer protection against some liability. However, you remain personally liable for your actions in the case of fraud, intentional harm or anything else the court rules.
What are the steps to apply for S Corp status in New Jersey?
- Apply for S corporation status with the Internal Revenue Service
- Be fully registered with the NJ Division of Revenue and have a Certificate of Incorporation or a Certificate of Authority to do business in this State.
- File a New Jersey S Corporation Election Form CBT-2553. Out-of-state corporations who have not received authorization to do business in New Jersey must also attach the S Corporation Certification with their filing.
What else should I know about Sub-Chapter S filing in New Jersey?
For the election to be in effect for the current tax year, the New Jersey S Corporation Election must be filed within 3 ½ months from the beginning of the fiscal year. For example, filing of the election for a fiscal period beginning July 1 must be done by October 15. The postmark date is used as the filing date. To ensure proper proof of filing, it is suggested that the S Corporation election documents be sent by registered mail or courier service.
Every shareholder of the corporation must consent to this election. Out-of-state corporations must be authorized to do business in New Jersey. Within 30 days after filing, the Division of Revenue will notify you whether or not your election is accepted.
Once an election is made and accepted, a corporation may remain a New Jersey S corporation as long as it is a Federal S corporation.
NJ Sub Chapter S Incorporation Attorneys
Need an experienced business lawyer to help you incorporate a Sub-Chapter S corporation in New Jersey? Contact our NJ Sub Chapter S incorporation attorneys today. One of our lawyers will respond to your inquiry within 24 – 48 hours. Flat fees available for Sub-Chapter S incorporation services.
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