USA – NEW JERSEY Law and Practice Contributed by: David Freylikhman, Cory Mitchell Gray, David Jensen and Jody Saltzman, Greenberg Traurig LLP
5.6 Annual Entity Maintenance and Accounting Compliance
ships. The most common entity is the limited liability company (LLC), which affords the most flexibility and pass-through taxation, as well as fewer formalities than corporations. 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity Corporation A corporation in New Jersey, as elsewhere, provides a separation between the shareholders, directors and officers. The shareholders are the owners of the cor - poration, and they elect the board of directors. The directors manage the business trajectory and activi - ties of the corporation. The directors appoint officers who manage the day-to-day business and affairs. The main benefit of a corporation is that shareholders have no personal liability for the corporation except for cer - tain specific express instances. LLC A New Jersey LLC has many of the same benefits as a corporation, but is preferred for its flexibility of management while affording liability protection to its members. In addition, unlike corporations, LLCs are not taxed on the entity level; rather, tax liability passes through to each of the members individually. Partnerships Partnerships have become far less common in recent years, especially with the increased popularity and ease of LLCs. Partnerships in New Jersey are more likely to be limited partnerships that combine a limited partner and a general partner. The limited partner is insulated from unlimited liability, but does not partici - pate in the management or operation of the business. 5.3 REITs REITs are available in New Jersey and can be either public or private. 5.4 Minimum Capital Requirement There are no minimum capital requirements in New Jersey. 5.5 Applicable Governance Requirements In all instances, annual reports must be filed with the State of New Jersey Division of Revenue and Enter - prise Services.
Many property owners have internal accounting groups or hire outside accounting firms to handle real estate investment entities. At minimum, annual reports will be required for filing for all New Jersey corpo - rations, LLCs, non-profits, limited partnerships and limited liability partnerships. The process is relatively easy and can be completed online along with payment of applicable filing fees. 6. Commercial Leases 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time While New Jersey does recognise licences and occupancy agreements, the most prevalent form of arrangement for the use of real estate is a lease. A licence (or occupancy agreement) will not result in the grant of an interest in property for the licensee/occu - pant, but rather will confer a lesser right for limited use that is often terminable and revocable at the will of the property owner. The lease creates a possessory interest in property and affords the tenant greater rights, including exclu - sivity and assignability (as permitted by the landlord), and is not generally terminable prior to the expiry of the lease term, in the absence of a default by the ten - ant or other narrowly construed circumstances. 6.2 Types of Commercial Leases Commercial Leases Commercial leases in New Jersey can be net leases or gross leases. In a gross lease, the landlord typi - cally provides certain building services to tenants and charges back to said tenants a fractional share of the costs (sometimes above a base year and at other times at the amounts then-expended). In this scenario, the tenant will typically pay rent to the land - lord that comprises two parts: • a base rent payment that is fixed but may increase annually; and • additional rent payments, which would include operating expenses for the property such as real estate taxes, insurance and maintenance (which
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