New Jersey LLC Taxation

New Jersey law permits the formation of a "limited liability company" or "LLC" to operate a business. LLCs formed in other states or countries are also permitted to do business in New Jersey, so long as the LLC is registered with the state. Any business deriving income from New Jersey, including an LLC, is required to pay tax on this income, which is overseen by the Division of Revenue within the New Jersey Department of Treasury. All LLCs must register with the Division of Revenue and pay tax consistent with its tax classifications for federal income tax purposes.

  1. New Jersey Business Registration

    • The New Jersey Division of Revenue is responsible for collection of taxes in New Jersey. All businesses are required to file a Business Registration Application with the division. The deadline to submit this application is 60 days after forming the LLC. After processing the application, the division sends to the business all necessary forms and information regarding business tax filings in New Jersey, as well as information regarding licensing and insurance.

    LLC Income Tax Classifications

    • The IRS does not have a tax classification for limited liability companies for income tax purposes. An LLC is taxed either as a corporation, partnership or sole proprietorship. After formation, an LLC chooses its tax classification by filing Form 8832 -- called “Entity Classification Election” -- with the IRS (see Resources). The tax classification chosen by the LLC for federal income tax purposes is the tax classification that is used for state income tax purposes in New Jersey. A single-member LLC is classified as a sole proprietorship, unless the LLC chooses a different federal classification.

    Partnership Filing

    • LLCs electing to be taxed as a partnership file Form NJ-1065 - 2006 NJ Partnership Return. As a rule, an LLC deriving any income from its business in New Jersey pays an annual filing fee of $150 per LLC member and an installment payment equal to 50 percent of the annual fee. The maximum payment is $250,000. Different rules apply for nonresident LLC members: corporate members pay tax equal to 9 percent of taxable income, while the rate for non-corporate members is 6.37 percent.

    Corporate Filing

    • LLCs electing a corporate tax classification file form CBT-100 - 2006 Business Tax Return. The tax rate is 9 percent based on net income, with a minimum tax of $500; however, for a corporation part of an affiliated group of corporations with an aggregate payroll at or above $5 million, the minimum fee is $2,000 per group member. For business with annual net income less than $100,000, the corporate tax rate is 7.5 percent and for income less than $50,000 the rate is 6.5 percent, but the $500 minimum still applies.

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