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There is no advantage to forming a foreign entity, especially for tax considerations unless you have the liking to pay Delaware an annual fee. You are still fully liable to New Jersey for all taxes on business income if you want to do business in that state.
As for legal protection, if you want to use the New Jersey court system, you must still register with New Jersey as a foreign corporation.
The benefit for choosing Delaware is that it has a corporate-friendly court system for large corporations. There is virtually nothing advantageous as a small intra-state company.
If you were operating a busines in Delaware, then you would be paying DE taxes on that income earned there. In that case, you could set up your entity in either state, and the opposite state you would need to register as a foreign corporation or LLC