New Jersey Corporation Advantages Disadvantages



New Jersey Corporation Advantages Disadvantages

New Jersey Corporation Advantages Disadvantages

New Jersey Corporation - Articles of Incorporation must be drafted and submitted to the New Jersey Secretary of State, Corporations Division. Once articles of incorporation have been successfully filed, your New Jersey Corporation has been formed and this begins its existence as a New Jersey corporate entity.

A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.


New Jersey Corporation Advantages Disadvantages

Advantages and Disadvantages
of a New Jersey Corporation

New Jersey Corporation Advantages Disadvantages

Advantages of a Corporation

  • Shareholders have limited liability for the corporation's debts or judgments against the corporations.
  • Generally, shareholders can only be held accountable for their investment in stock of the company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.)
  • Corporations can raise additional funds through the sale of stock.
  • A corporation may deduct the cost of benefits it provides to officers and employees.
  • Can elect S Corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.
  • A corporation pays 15% federal income tax on taxable income up to $50,000; 25% tax on income from $50,001 - $75,000; 34% tax on income from $75,001 - $100,000; 39% tax on income from $100,001 - $335,000; and 34% tax on income over $335,000.
  • A sole proprietor who filed a federal income tax return under the status of married, filing jointly, would pay 15% federal income tax on taxable income up to $35,800; 28% tax on income from $35,801 to 86,500; and 31% tax on income over $86,501.

New Jersey Corporation Advantages Disadvantages

Disadvantages of a Corporation

  • The process of incorporation requires more time and money than other forms of organization.
  • Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
  • Incorporating may result in higher overall taxes. Dividends paid to shareholders are not deductible form business income, thus this income can be taxed twice.

Federal Tax Forms for Regular or "C" Corporations

  • Form 1120 or 1120-A: Corporation Income Tax Return
  • Form 1120-W Estimated Tax for Corporation
  • Form 8109-B Deposit Coupon
  • Form 4625 Depreciation



New Jersey Corporation Advantages Disadvantages

New Jersey's 2012 Business Tax Climate Ranks Last

New Jersey ranks last in the Tax State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property.

New Jersey's State and Local Tax Burden Highest in Nation

New Jersey's and local tax burden percentage has consistently ranked among the nation's highest, this year being no exception, taking the top stop, currently estimated at 12.2% of income (1st nationally), above the current national average of 9.8%. Compared to the 1977 data, New Jersey had a rate of 12.4% (3rd nationally), decreasing 0.2% overall. Currently residents pay $6,751 per capita in state and local taxes.

New Jersey's Individual Income Tax System

New Jersey's personal income tax system consists of six brackets and a top rate of 8.97% kicking in at an income level of $500,000. Among states levying personal income taxes, New Jersey's top rate ranks 6th highest nationally. New Jersey's 2008 state-level individual income tax collections were $1,457 per person, which ranked 6th highest nationally.

New Jersey's Corporate Income Tax System

New Jersey's corporate tax structure consists of a flat 9% on corporate income. However, corporations with total net income of $100,000 or less pay 7.5% and corporations with total net income of $50,000 or under pay 6.5%. Among states levying corporate income taxes, New Jersey's top tax rate ranks 5th highest nationally. In 2008, state-level corporate tax collections (excluding local taxes) were $326 per capita, ranking the state 5th highest nationally.

New Jersey Sales and Excise Taxes

New Jersey levies a 7% general sales or use tax on consumers, which is above the national median of 5.85%. In 2007 combined state and local general and selective sales tax collections were $1,424 per person, ranking 22nd highest nationally. New Jersey's gasoline tax stands at 14.5 cents per gallon and ranks 47th highest nationally. New Jersey's cigarette tax stands at $2.70 per pack of twenty, which is the 5th highest cigarette tax in the nation. The sales tax was adopted in 1966, the gasoline tax in 1927 and the cigarette tax in 1948.

New Jersey Property Taxes: Highest Per Capita in the Nation

New Jersey is one of the 37 states that collect property taxes at both the state and local levels. As in most states, local governments collect far more. New Jersey's localities collected $2,372.03 per capita in property taxes in fiscal year 2006, which is the latest year the Census Bureau published state-by-state property tax collections. At the state level, New Jersey collected $0.40 in property taxes during FY 2006, making its combined state/local property taxes $2,372.43 per capita, New Jersey's combined per capita collections were the highest in the nation.

Reference

Tax Foundation


Home | New Jersey Corporation Advantages Disadvantages | Site-Map