How to Start an S Corp in New Hampshire
New Hampshire’s more than 130,000 small businesses employ almost 50% of the state’s workers. That makes small businesses an essential part of the state’s economy.
When starting a business in New Hampshire, you’ll have many different types of business structure to consider. Forming an S corporation (S corp) can offer you several money-saving tax benefits. This guide will walk you through how to form an S corp as well as provide tips for maintaining it in good standing.
Not in New Hampshire? Check out our other How to Start an S Corp guides to learn more.
Recommended: If you have at least $60,000 in net earnings, an S corp may offer tax advantages. Let Northwest start your S corp today.
Factors to Consider Before Starting an S Corp in New Hampshire
Before forming an S corp, you have to consider the following factors:
- Is an S corporation the best strategy for your business?
- S corporation restrictions
- Are S corp tax advantages right for you?
Is an S Corporation the Best Strategy for Your Business?
For help with choosing the right structure for your business, visit our Choosing a Business Structure guide.
S Corporation Restrictions
S corps have several restrictions, such as being limited to one class of stock and 100 shareholders. Read our What Is an S Corporation guide for full details.
Are S Corp Tax Advantages Right for You?
An S corporation is a tax designation that can be elected by a limited liability company (LLC) or corporation. With an S corp, business owners are considered employees of the company and must receive a reasonable salary. Since all S corps technically have employees, the s corp must run payroll.
In order to benefit from a New Hampshire S corp tax designation, your business needs to make enough money to offset payroll expenses. Furthermore, S corps are beneficial for business owners who take large distributions in addition to their salary.
To learn more about the tax advantages of an S corp, read our LLC vs. S corp guide and take a look at our S Corp tax calculator.
For a Free Consultation with a Tax Professional
How to Form a New Hampshire S Corp
There are two main ways to start an S corp:
- By forming an LLC and electing S corp tax status from the IRS when you request your employee identification number (EIN)
- By forming a corporation and electing S corp status from the IRS
We recommend forming an LLC because it’s simpler and more cost-effective.
Recommended: If you have an existing LLC, visit our How to Convert an LLC to S Corp guide.
Steps for Forming an LLC and Electing S Corp Status in New Hampshire
Starting a New Hampshire LLC and electing S corp tax status is easy. You can use our guides to start an LLC with the S corp status yourself, or you can hire a service provider like Northwest to guide you through this process.
There are five basic steps to start an LLC and elect S corp status:
Step 1: Name Your LLC
Step 2: Choose a Registered Agent
Step 3: File the Certificate of Formation
Step 4: Create an Operating Agreement
Step 5: Get an EIN and File Form 2553 to Elect S Corp Tax Status
Step 1: Name Your LLC
Choosing a company name is the first and most important step in starting your LLC in New Hampshire.
Be sure to choose a name that complies with New Hampshire naming requirements and is easily searchable by potential clients.
1. Follow the naming guidelines for a New Hampshire LLC:
- Your name must include the phrase “limited liability company” or one of its abbreviations (LLC or L.L.C.).
- Your name may contain the name of a member or manager of the LLC.
- Your name cannot imply that the LLC was organized for any non-permitted purpose or one not outlined in its Certificate of Formation.
- Your name cannot include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
- Your name cannot include the name of a political party without authorization.
- Certain restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual to be part of your LLC.
- Your name cannot include the words "farmers' market" unless the LLC meets the definition of a farmers' market.
- Your name must be distinguishable from any existing business in the state. This includes New Hampshire reserved names.
You can also read the New Hampshire state statute about LLC naming guidelines for more information.
2. Is the name available in New Hampshire? You can use the business search on the New Hampshire QuickStart website to see if your desired LLC name is available.
3. Is the URL available? We recommend checking to see if your business name is available as a web domain. Even if you don't plan to create a business website today, you may want to buy the URL in order to prevent others from acquiring it.
Step 2: Choose Your New Hampshire Registered Agent
You must elect a registered agent for your New Hampshire LLC.
An LLC registered agent will accept legal documents and tax notices on your LLC's behalf. You will list your registered agent when you file your LLC's Certificate of Formation.
Many business owners choose to hire a registered agent service. Many of these services will form your LLC for a small fee and include the first year of registered agent services for free.
Step 3: File the New Hampshire LLC Certificate of Formation
The New Hampshire Certificate of Formation is used to officially register an LLC.
File Your New Hampshire Certificate of Formation
OPTION 1: File Online With New Hampshire QuickStart
File Online- OR -
OPTION 2: File Form LLC-1 by Mail
Download FormState Filing Cost: $100, payable to the State of New Hampshire (Nonrefundable)
Mailing Address:
Corporation Division, NH Dept. of State
107 N. Main St., Rm 204
Concord, NH 03301
Step 4: Create an LLC Operating Agreement
An LLC operating agreement is a legal document that outlines the ownership and member duties of your LLC.
For more information, read our New Hampshire LLC Operating Agreement guide.
Our operating agreement tool is a free resource for business owners.
Step 5: Get an EIN and Complete Form 2553 on the IRS Website
An EIN is a number that is used by the US Internal Revenue Service (IRS) to identify and tax businesses. It is essentially a Social Security number for a business.
EINs are free when you apply directly with the IRS.
Elect S Corp Tax Status
During the online EIN application, the IRS will provide a link to Form 2553, the Election By a Small Business form.
Visit our Form 2553 Instructions guide for detailed help with completing the form.
This is the form to elect S corp tax status for your LLC:
Ready to start saving on your taxes?
We recommend using a formation service to start your New Hampshire S corp for you, so you can focus on the things that matter most — growing your business.
Keep Your New Hampshire S Corp Compliant
After you form your S corp, you must keep your business compliant with all New Hampshire state laws and guidelines. Like most states, New Hampshire requires all S corps to file an annual report and pay all applicable state taxes.
New Hampshire S Corp Annual Report
All S corps in New Hampshire must file an annual report with the New Hampshire Secretary of State. Even though you elected the S corp tax designation for your business, New Hampshire will still require you to follow its guidelines for LLCs. Your business’s annual report is due on April 1 each year, and the filing fee is $100. You can file online or by mail.
Visit our New Hampshire Annual Report guide for a step-by-step overview of the filing process.
New Hampshire S Corp Taxes
S corporations benefit from pass-through taxation, meaning the business’s profits pass-through to S corp owners’ individual tax returns. S corp owners make money from their reasonable salary and distributions, and New Hampshire S corp owners can expect to pay the following taxes:
Federal Self-Employment Taxes
Self-employment taxes cover social security and medicare. The self-employment tax rate is 15.3%, and money you take as salary will be subjected to the self-employment tax. However, distributions are not subjected to this tax.
Federal Income Taxes
Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets as well as the percent owed will change each year. Both your salary and distributions are subjected to federal income tax.
New Hampshire Income Taxes
New Hampshire is one of the few states without a state income tax. You can save a lot of money when you operate your business in such a state, which then allows you to reinvest those savings in your business to help it grow. This is one reason New Hampshire consistently ranks among the best states in which to start a business.
New Hampshire Sales and Use Tax
New Hampshire also doesn’t have a sales and use tax. Many states use sales and use taxes to generate revenue for their local governments, which can impact local businesses’ bottom lines.
Because businesses in New Hampshire don’t have to pay sales and use tax, they can save money on the cost of goods and then sell their products at a lower price. Without a sales tax, businesses can improve their bottom lines while giving the overall economy a healthy boost.
Additional State Taxes
New Hampshire also has state-specific taxes that may apply to certain businesses. Some examples of these additional taxes include:
- Tobacco Tax
- Timber Tax
- Meals and Rooms Tax
- Communication Services Tax
- Electricity Consumption Tax
The New Hampshire Department of Revenue Administration provides details on numerous taxes specific to the state.
New Hampshire Local Taxes
Managing a business — whether in Manchester, Nashua, or any other smaller city in New Hampshire — may require you to pay local municipality taxes. Check with your local government to ensure your business complies with local laws.
Start a New Hampshire S Corp FAQ
An S corporation (S corp) is a tax designation that an LLC or a corporation can elect.
No. The default taxes for an LLC and taxes for an S corp are not the same.
With an S corp, owners pay personal income tax and self-employment tax on a predetermined salary. They may then withdraw any remaining profits from the business as a “distribution,” which isn’t subject to self-employment tax.
With an LLC, all company profits pass through to the owners’ personal tax returns, and then the owners must pay personal income tax and self-employment tax on the entire amount.
S corp owners are required to earn a “reasonable” salary, which basically means a fair market rate based on the individual’s qualifications as well as their duties and responsibilities at the company. The purpose of this requirement is to prevent S corp owners from paying themselves an artificially low salary in order to pay less self-employment tax.
A distribution is a dividend that a shareholder/owner can take from the business profits that remain after a company pays all of its employee salaries. Shareholders must pay personal income tax on distributions, but distributions aren’t subject to self-employment tax.
LLCs and corporations that operate under a “doing business as” (DBA) name can choose the S corp election.
Some of New Hampshire’s largest industries include manufacturing, technology, sciences, tourism, and healthcare. You can save significant money as a business owner in any industry if you elect the S corp tax designation.
New Hampshire is the best state in which to form your business if you plan to operate locally. With no state income tax, New Hampshire is an attractive option for business owners looking to save money on taxes in a favorable business climate.