Converting Your New Hampshire Sole Proprietorship to an LLC in 2024

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Convert New Hampshire Sole Proprietorship to LLC

As a small business owner in New Hampshire, you may have started your business as a sole proprietorship due to its simplicity and low initial costs. However, as your business grows, you may want to start an LLC in New Hampshire, which is more suitable for your needs. Converting your New Hampshire sole proprietorship to an LLC can protect your assets and optimize your business’s growth potential.

In this comprehensive guide, Webinarcare Editorial Team will walk you through the step-by-step process of Converting your New Hampshire Sole Proprietorship to an LLC, enabling you to make an informed decision for your business.

How to Convert your New Hampshire Sole Proprietorship to an LLC

What is a Sole Proprietorship and Limited Liability Company?

A sole proprietorship is the simplest and most common form of business ownership, where a single individual owns and operates the entire business. A sole proprietorship has no legal distinction between the owner and the business, meaning the owner is responsible for all the business’s debts, liabilities, and obligations. 

On the other hand, a Limited Liability Company (LLC) is a legal business structure that combines the limited liability protection of a corporation with the pass-through taxation of a sole proprietorship or partnership. This means the owners, known as members, are not personally responsible for the company’s debts and liabilities. The company’s profits and losses are reported on the members’ tax returns. We reviewed some of the Best LLC Services and provided features as an add-on with their packages for you to check out.

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Having a sole properietorship had given you freedom and comfortability, but, starting an LLC in New Hampshire has a lot to offer, which is why it is a highly recommended business structure. It is suggested that you speak with a legal professional first before you begin coverting your sole proprietorship to an LLC. They will understand what’s best for you and your company.

– WEBINARCARE EDITORIAL TEAM

Steps on Converting New Hampshire Sole Proprietorship to an LLC

To convert New Hampshire sole proprietorship to an LLC, you must follow the guidelines that include choosing a name for your LLC, appointing a Registered Agent, preparing for the Certificate of Formation, creating an Operating Agreement, obtaining an EIN, opening a business bank account, registering for state tax and licenses, and lastly, informing clients and vendors of conversation.

Step 1: Choose A Name For Your LLC

The first step in converting your sole proprietorship to an LLC is selecting a unique and distinguishable name for your new entity. In New Hampshire, there are specific naming requirements and restrictions that you must adhere to when choosing your LLC’s name:

  • The name must include “Limited Liability Company,” “LLC,” or “LLC.“
  • The name cannot include words or phrases that imply the company is engaged in activities it is not authorized to conduct.
  • The name must be distinct from other registered businesses in New Hampshire.

In New Hampshire, if you do not wish to file your LLC right away but want to hold the name that you have decided on, then you can reserve your LLC name for 120 days. You must file a name reservation application in the New Hampshire Secretary of State to keep the name. 

You can register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire for your business. A DBA allows a company to operate under the name of the person or entity who owns it. If you have decided to file for New Hampshire DBA, you can file it in three methods, online, by mail, and in person filing. However, before filing a DBA, you should know that you need to renew your DBA from up to five years, which costs around $50.

You can check the availability of your desired business name by searching the New Hampshire QuickStart Business Lookup‘s website.

Step 2: Appoint a Registered Agent

In New Hampshire, all LLCs are required to appoint a Registered Agent. Registered Agent is a person or entity responsible for receiving and forwarding legal and tax documents on behalf of your New Hampshire LLC, such as service of process, New Hampshire Annual Report, and state tax notifications. Your Registered Agent must have a physical address in New Hampshire and be available during regular business hours. In New Hampshire, the cost of Registered Agent usually ranges from $50 – $150.

When selecting a Registered Agent, consider their reliability, knowledge of state requirements, and ability to manage sensitive legal documents. You can serve as your own Registered Agent, appoint another individual, or hire the Best Registered Agent Service.

Step 3: Prepare and File the New Hampshire Certificate of Formation

To officially form your New Hampshire LLC, you must prepare and file New Hampshire Certificate of Formation with the New Hampshire Secretary of State. The Certificate of Formation is a legal document that outlines essential information about your  New Hampshire LLC, including:

  • The LLC’s name
  • The Registered Agent’s name and address
  • The LLC’s purpose
  • The LLC’s duration (perpetual or for a specific term)
  • The names and addresses of the initial members or managers

In New Hampshire, the filing fee for the Certificate of Formation is $100. You can submit the document online through the New Hampshire Secretary of State’s website or by mail. Processing times may vary, so check the website for current information.

Step 4: Create an Operating Agreement

Although not legally required, New Hampshire Operating Agreement is a crucial document that outlines the structure, management, and financial arrangements of your New Hampshire LLC. The operating agreement should include the following:

  • The roles and responsibilities of members and managers.
  • The process for admitting or removing members.
  • The allocation of profits and losses among members.
  • The procedure for making major decisions.
  • The process for dissolving the LLC.

Having a written New Hampshire operating agreement can help prevent disputes and ensure a smooth operation of your LLC. It is advisable to work with New Hampshire Business Attorney to draft an operating agreement that meets the specific needs of your business and complies with New Hampshire laws.

Step 5: Obtain an Employer Identification Number (EIN)

An Employer Identification Number (EIN) in New Hampshire, or Federal Tax Identification Number, is a unique nine-digit number issued by the Internal Revenue Service (IRS) to identify your business for tax purposes. With an EIN, you can open a business bank account, file tax returns, and hire employees.

To obtain an EIN for your New Hampshire LLC, you can apply online on the IRS website, by mail, or by fax. The online application process is the fastest and most convenient method, as you will receive your EIN immediately upon completing the application. There is no fee to obtain an EIN.

The application of an EIN in New Hampshire can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

Recommended: Professional services have the EIN included in their LLC formation package. We recommend using –

LegalZoom – ($0 + State Fee for LLC formation)

Step 6: Opening of New Hampshire Business Bank Account

When converting your sole proprietorship to an LLC, separating your personal and business finances is essential by opening a dedicated business bank account. New Hampshire business bank account helps maintain limited liability protection and makes managing your business’s finances and taxes easier.

To open a business bank account in New Hampshire, you will need the following documentation:

  • Your LLC’s Certificate of Formation
  • Your LLC’s EIN
  • Your LLC’s operating agreement (if applicable)
  • A resolution authorizing the opening of the account (if required by the bank)

You can check out the Best Banks in New Hampshire, which offers the best fees, services, and convenience for your business needs.

Step 7: Register for New Hampshire Taxes and Licenses

As an LLC in New Hampshire, your business may be subject to various state taxes and licenses, depending on the nature of your operations. Common taxes and licenses include:

  • Sales Tax: If your LLC sells taxable goods or services, you must register for New Hampshire sales tax permit and collect sales tax from your customers.
  • Employer Taxes: If your LLC has employees, you may be required to register for New Hampshire unemployment insurance and workers’ compensation coverage.
  • Business License: New Hampshire Business License is a legal document granted by a state government body that permits you to conduct business within the area under its jurisdiction. The price of business licenses and permits in New Hampshire ranges from $50 – $300.

To ensure you comply with all applicable New Hampshire tax and licensing requirements, you can check out the New Hampshire Department of Revenue Administration for more information.

Step 8: Inform Clients and Vendors of the Conversion

After converting your New Hampshire sole proprietorship to an LLC, you must inform your clients, vendors, and other business contacts of the change. Update your contracts, invoices, and marketing materials with your new LLC name, and communicate the transition to ensure a smooth and professional process.

Ongoing Compliance For New Hampshire LLCs

As an LLC in New Hampshire, you are subject to ongoing compliance and reporting requirements, including:

  • Filing Annual Report with the New Hampshire Secretary of State and pay the associated fee and which you can pay every 1 year (1st April).
  • Maintaining accurate and up-to-date records of your New Hampshire LLC’s finances, meetings, and decisions. You can manage your finances using spreadsheets, accounting software, or becoming a CPA in New Hampshire.
  • Adhering to any industry-specific licensing and regulatory requirements.

Benefits of Converting New Hampshire Sole Proprietorship to an LLC

In converting New Hampshire Sole Proprietorship, there are benefits that you should consider. Here are the benefits you must know before converting your sole proprietorship:

Limited Liability Protection

Converting a sole proprietorship to an LLC provides limited liability protection for the business owner. This means that the owner’s assets (such as their home or car) are separate from the business assets and are protected from being seized to pay off business debts or in case of a lawsuit.

Credibility and Professionalism

New Hampshire LLC can help improve the credibility and professionalism of the business. Many customers and suppliers prefer dealing with an LLC, which shows commitment and stability.

Tax Flexibility

With New Hampshire LLC, you can choose how your business will be taxed. It can be taxed as a sole proprietorship, a partnership, or a corporation. This allows you to choose the tax structure that best fits your business and may result in potential tax savings.

Easier Access to Funding

New Hampshire LLC may have an easier time obtaining funding from banks and investors than a sole proprietorship. Many lenders and investors prefer to work with an LLC, as it demonstrates a commitment to the business and provides legal protection.

Ownership and Management Flexibility

New Hampshire LLC allows you to have multiple owners (called members) and to divide ownership and management responsibilities among them. This can make growing your business easier or bring in new partners.

Enhanced Privacy

In some states, such as New Hampshire, an LLC can offer more privacy than a sole proprietorship. This is because the business owner’s personal information may not be as public as it would be with a sole proprietorship.

Easier Transfer of Ownership

With New Hampshire LLC, transferring business ownership to another person or entity is generally easier. This can be beneficial if you decide to sell your business, bring on new partners, or plan for succession.

Continuity of Existence

Unlike a sole proprietorship, which ceases to exist upon the death or incapacity of the owner, New Hampshire LLC can continue to operate even if the owner passes away or becomes incapacitated. This provides stability and continuity for the business and its employees.

Compliance with New Hampshire Requirements

Some states require certain types of businesses, such as those in the professional services industry, to operate as New Hampshire LLC or another corporate entity. Converting your sole proprietorship to an LLC in New Hampshire ensures that your business complies with these regulations and avoids potential legal issues.

Access to Additional Benefits

New Hampshire LLC may be eligible for additional benefits, such as state-specific tax incentives or credits, not available to sole proprietorships. These benefits can help reduce your tax burden and support the growth of your business.

In summary, converting a sole proprietorship to an LLC in New Hampshire can provide significant benefits, including limited liability protection, tax flexibility, increased credibility, and easier access to funding. It’s essential to carefully consider these advantages and consult with a legal or tax professional before deciding to convert your business structure.

FAQs

Why should I convert my New Hampshire sole proprietorship to an LLC?
Converting to an LLC can provide liability protection for your personal assets.
What are the benefits of an LLC in New Hampshire?
Some benefits include pass-through taxation, limited personal liability, and simpler organization and management.
How much does it cost to convert your NH sole proprietorship to an LLC?
The filing fee for an LLC in New Hampshire is $100.
Can I convert my New Hampshire sole proprietorship to an LLC myself?
Yes, you can file the necessary paperwork with the New Hampshire Secretary of State yourself.
How do I choose a unique name for my New Hampshire LLC?
Use the New Hampshire Secretary of State’s online Corporations Division name availability search tool to ensure the name is not already in use.
Do I need to get a new EIN for my New Hampshire LLC after converting from a sole proprietorship?
If you are the only member of the LLC and you have used your sole proprietorship EIN, you will need a new EIN for your LLC.
What is the procedure for converting my sole proprietorship to an LLC in New Hampshire?
You must file Articles of Organization with the New Hampshire Secretary of State’s office.
Will I need a Registered Agent for my New Hampshire LLC?
Yes, you will need to appoint a Registered Agent who has a physical address in New Hampshire.
Can I be my own Registered Agent in New Hampshire for my LLC?
Yes, you can act as the Registered Agent for your LLC if you have a physical address in New Hampshire and list it as such on the Articles of Organization.
How long does it take to get my New Hampshire LLC approved after filing?
It usually takes 3-5 days for an LLC to be processed and approved after filing.
What if the name I want for my New Hampshire LLC is already taken?
You will have to choose a new name for your LLC that is unique in the state of New Hampshire.
Do I have to publish notice of my New Hampshire LLC’s formation?
No, New Hampshire does not require notice of LLC formation to be published.
Is there an annual fee for New Hampshire LLCs?
Yes, there is a $100 annual fee required for New Hampshire LLCs.
Can I convert my New Hampshire LLC back into a sole proprietorship later?
Yes, you can dissolve your LLC and return to operating as a sole proprietorship.
Do I have to get a business license for my New Hampshire LLC?
You may need a business license depending on the industry and location of your LLC in New Hampshire.
Will my tax requirements change when I convert my sole proprietorship to an LLC in New Hampshire?
Your tax requirements may change, so it is important to consult with a tax professional.
Do I need to renew my New Hampshire LLC every year?
Yes, you will need to file an annual report and pay a $100 fee to renew your New Hampshire LLC each year.
Where can I find information about New Hampshire LLC requirements?
The New Hampshire Secretary of State’s Corporations Division is the best source of information for New Hampshire LLC requirements.
How do New Hampshire LLCs pay taxes?
LLCs in New Hampshire are pass-through entities that file a business tax return and distribute profits and losses to their members.
Will creating an LLC in New Hampshire protect me personally from business debts?
Generally, creating an LLC in New Hampshire will provide limited liability protection for members, which should protect them from business debts.
What if a creditor sues my New Hampshire LLC?
The liability of the LLC members is limited to the amount of their investment in the LLC.
How easy is it to maintain the New Hampshire LLC?
Maintaining a New Hampshire LLC is relatively easy and involves filing annual reports, paying annual fees, and keeping accurate business records.
Can an LLC member divide his ownership interest as in community property in New Hampshire?
New Hampshire is not a community property state, so if married LLC members want to divide their interest, they must enter into a separation agreement.
Do I need to file annual reports with the State for my LLC in New Hampshire?
Yes, you will need to file an annual report and pay an annual fee of $100 to maintain your LLC in good standing.
What is the effect of converting my NY sole proprietorship to an LLC?
You will receive the benefits and legal protections associated with forming an LLC, such as separating personal liabilities from the business finances.
Can I convert my New Hampshire sole proprietorship to an S-corp?
Yes, it is possible to convert your LLC to a corporation after forming it, but you should consult with a tax professional before making any changes to your business’s tax structure.
What restrictions are there on naming an LLC in New Hampshire?
Your LLC’s name cannot include certain words or imply that it performs services that are not legal in New Hampshire.
What are some of the additional costs associated with converting my sole proprietorship to an LLC?
Besides the state filing fee, additional costs may include legal or accounting services required for drafting Operating Agreements and drafting required Resolutions.
What is an LLC, and how is it different from a sole proprietorship?
An LLC (limited liability company) is a legal business entity that provides protections and personal liability protection to its owners, whereas a sole proprietorship is a company that is owned and operated by one person with no legal separation between the owner and business.
How do I convert my New Hampshire sole proprietorship to an LLC?
The process of converting a sole proprietorship in New Hampshire to an LLC involves several steps that can be completed online at the New Hampshire Secretary of State website.
Is an LLC the best type of legal entity for my business?
It depends on your specific business’s needs and goals. The best legal entity ensures smooth operations to enable the maximum limit set for return-on-investment. Speak with an attorney or accountant to find out which legal entity is right for you.
What are some factors to consider when converting a sole proprietorship to an LLC in New Hampshire?
Some factors to consider when converting a sole proprietorship to an LLC in New Hampshire include taxation, liability protection, and the management structure that your business requires.
What are the requirements for starting an LLC in New Hampshire?
In New Hampshire, you must file Articles of Organization with the Secretary of State and pay the required fee. Additionally, you must prepare an Operating Agreement, obtain necessary licenses, and obtain an Employment Identification Number (EIN) from the Internal Revenue Service.
What is the cost to register an LLC in New Hampshire?
To register an LLC in New Hampshire, the filing fee for Articles of Organization is $100.
Can I change my llc name after filing the Articles of Organization in New Hampshire?
Yes. A business owner can change the name of an LLC in New Hampshire by filing an amendment to the Articles of Organization with the Secretary of State and paying the required filing fee.
Can I transfer my sole proprietorship property to my newly-formed LLC in New Hampshire?
Yes. You can transfer your business name, assets, and property from your sole proprietorship to your LLC by filing Articles of Conversion with the Secretary of State.
What does the phrase “limited liability” mean in an LLC?
Limited liability refers to the legal and financial protections that an LLC owner has against liability for business debts and legal liabilities that are incurred by the LLC.
Can my single-member LLC in New Hampshire be taxed as an S Corporation?
Yes. New Hampshire’s structure allows for limited liability companies to file their income taxes under Subchapter S of the Internal Revenue Code.
What is the difference between a foreign LLC and a domestic LLC in New Hampshire?
A domestic LLC obtains LLC status through registration with the New Hampshire Secretary of State, whereas a foreign LLC is representative of companies that are formed under the laws of other states and countries.
How do I check if my desired LLC name is already in use in New Hampshire?
You can check whether a desired LLC name is available through the New Hampshire Secretary of State’s Corporate Division website on the homepage.
Does New Hampshire require registered agents for LLCs?
Yes. All LLCs formed under New Hampshire law must have a registered agent appointed who can be located in the state.
Can I be the registered agent for my LLC in New Hampshire?
Yes, you can be the registered agent for your New Hampshire LLC.
How do I dissolve my New Hampshire LLC if it is no longer doing business?
You can dissolve your New Hampshire LLC by filing a Certificate of Dissolution with the Secretary of State.
What documents do I need to convert an LLC to a corporation in New Hampshire?
You will need to file Articles of Conversion and pay the related filing fees when converting an LLC into a corporation in New Hampshire.
Can I convert my LLC into a nonprofit corporation in New Hampshire?
Yes. In New Hampshire, LLC status may be terminated or a new corporation may be created by way of conversion by filing Articles of Conversion to incorporation documents.
Can an LLC have more than one member in New Hampshire?
Yes. In fact, many LLCs are set up as multi-member entities.
Can an LLC located outside New Hampshire do business in the state?
Yes, LLCs located elsewhere in the nation (or the world) can register in New Hampshire by filing a foreign LLC registration with the Secretary of State.
Am I required to submit the operating agreement with my LLC registration in New Hampshire?
No. While it is advised to write the Operating Agreement before sub registration, there is no policy that mandates registering it to conduct business in New Hampshire.
Does the state of New Hampshire have franchise taxes for LLCs?
Yes. LLCs that are located or do business in New Hampshire are subject to annual fees, including a business profits tax.
Is it necessary to open a separate account for my LLC?
It’s advisable to set up a separate bank account for your LLC, allowing for clear separation between your personal and business finances and bookkeeping in case there are discrepancies.
How do I change the address for my LLC in New Hampshire?
You can log in to the Secretary of State website and update your registered address in the Articles of Organization.
What is the deadline for filing an annual report for an LLC in New Hampshire?
An LLC’s annual report must be filed each year on or before April 1st to stay in good standing with the state.
Can the name of my LLC in New Hampshire be reserved before registering?
Yes, if the naming guidelines are suitable for all regulatory timelines- the LLC’s name may be reserved for 120 days by filing an Application for Reserved Name with the Secretary of State and paying a small fee.
When must my New Hampshire LLC renew its registration?
New Hampshire LLCs must file their report with the Secretary of State on or before the end of each calendar year.
Do I need to file a foreign LLC registration if my business only occasionally delivers services outside of New Hampshire?
No- New Hampshire provides an exemption from the state’s foreign deferral rules on LLCs for non-New Hampshire LLCs conducting business within the state for fewer than 30 days in The business purpose is to open chapters of good faith or operate an individual service occurrence.

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Conclusion

Converting your New Hampshire sole proprietorship to an LLC is a significant decision that can provide valuable benefits, such as limited liability protection, tax advantages, and enhanced credibility. Following the steps outlined in this guide and consulting with legal and financial professionals, you can successfully navigate the conversion process and position your business for future growth and success.

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