How to Start an S-Corporation in New Hampshire (2024 Guide)

Start an S-Corporation in New Hampshire

If you want to start an LLC in New Hampshire, there are things that you should consider. New Hampshire is the home to a thriving business community, making it an attractive location for entrepreneurs. One popular business structure is the S-Corporation, which offers several tax and operational advantages. This comprehensive guide will explore the process of starting an S-Corporation in New Hampshire, including the costs, steps, advantages, and disadvantages associated with this business structure.

Webinarcare Editorial Team will help you gain knowledge through thorough research and market study. Before starting your S-corp, all the steps in this article must guide you.

What is an S-Corporation?

An S-Corporation is a type of corporation that elects to be taxed under Subchapter S of the Internal Revenue Code. This tax treatment allows S-Corporations to enjoy pass-through taxation, meaning the corporation’s income, deductions, and credits flow through to the shareholders, who report this information on their individual tax returns. This structure helps to avoid the double taxation experienced by C-Corporations.

An S corporation (S corp) is not a type of corporate entity, unlike a limited liability company (LLC) or other companies. It’s a tax classification that might result in significant financial savings for corporations and LLCs but in different ways. S-corp is similar to LLC, except that the IRS treats it as a corporation for tax purposes.

Limitations and Requirements of S-Corp

As you have decided to have an S-Corp structure for your business, you must know the limitations and requirements to qualify for S-Corp status. We have listed some important points to consider following for your reference-

  • Be a domestic corporation.
  • Not be an ineligible corporation, such as specific financial institutions, insurance providers, or domestic corporations engaged in overseas sales.
  • Have just one type of stock.
  • Have a maximum of 100 shareholders or members.
  • Have only permitted individuals, certain trusts, and estates as stockholders or members.

You can apply for an S-Corp in New Hampshire if qualified for the limitations and requirements.

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How to Form an S-Corporation in New Hampshire?

To create S-Corp in New Hampshire, you must follow the below guidelines that include forming a business name, hiring a Registered Agent, filing your Certificate of Formation, creating an operating agreement, requesting an EIN, and filing a form 2553.

Step 1: Register a Business Name in New Hampshire

After you have decided on the idea to start an S-Corp in New Hampshire, deciding the name for your corporation is significant. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity.

If you want to set up an S-Corp, there is a complete guide on New Hampshire Business Name Search for a proper business name. Here are some guidelines you must follow while naming your S-corp.

  • Avoid profanities
  • The name should be available, and no other entity should have the same name in New Hampshire.
  • Limit of restricted words that need a license in New Hampshire
  • Do not use a business name that sounds like a government agency or entity (like “police,” “county,” and “state”)

Step 2: Hire a Registered Agent

The next step in starting an S-corp in New Hampshire is hiring a Registered Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents (such as subpoenas), all notices of lawsuits, and other official government correspondence. Forming an LLC with an S-corp will be easier if you have Registered Agent in New Hampshire.

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Step 3: File For Certificate of Formation

The Certificate of Formation is an important document to start your limited liability company (LLC). New Hampshire Certificate of Formation is a simple document that contains the business name and address as well as the name and address of the person who received lawsuits on behalf of the organization. For the Certificate of Formation to be filed in NJ Department of Treasury, you need to pay a filing fee of $100. In New Hampshire, the filing fee of forming an LLC is $100.

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Step 4: Creating an Operating Agreement

After you have filed your Certificate of Formation, the next step is to create an operating agreement in New Hampshire. The operating agreement is essential and necessary since it will cover your corporation’s important documentation and rules. The operating agreements usually include the following:

  • Article I: Organization
  • Article II: Management and Voting
  • Article III: Capital Contributions
  • Article IV: Distributions
  • Article V: Membership Changes
  • Article VI: Dissolution

After creating the LLC operating agreement, you can benefit in several ways since it will discuss how decisions for the business will be made, including management and member voting structure.

Step 5: Request for an EIN

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your general partnership. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

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.

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Step 6: File Form 2553 for your S-Corp Business

Once you have obtained your EIN and Certificate of Formation to form an S-Corp, you must file Form 2553, Election by a Small Business Corporation, to apply for S-corp status. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or at most 75 days after the beginning of the tax year in which the election is to take effect.

If your LLS-Corp has passed the deadline of 75 days, you must also file Form 8832, Entity Classification Election, to opt to be taxed as a corporation. Then you would send Form 2553 and Form 8832 jointly by certified mail from the USPS.

In New Hampshire, you can file your form 2553 in the Department of the Treasury Internal Revenue Service Center – Kansas City, MO 64999 Fax: 855-887-7734.

Costs of Forming an S-Corporation

There are several costs associated with forming an S-Corporation in New Hampshire, including:

  1. Filing Fees: When forming a corporation in New Hampshire, you must file Articles of Incorporation with the New Hampshire Secretary of State and pay a filing fee of $100 for filing online, by mail, or in person.
  2. Statement of Information: After forming the corporation, you must file a Statement of Information (Form SI-550) within 90 days and pay a filing fee (currently $25). This statement must be filed annually after that.
  3. Franchise Tax: S-Corporations in New Hampshire are subject to the annual franchise tax, which is the greater of a minimum tax (currently $800) or a calculated tax based on the corporation’s net income.
  4. Other Costs: Depending on the nature of your business, additional costs may include obtaining licenses and permits, registered agent services, and professional fees for legal and accounting services.

Advantages of Forming an S-Corporation

There are numerous advantages to incorporating an S-Corp, but you should be aware of certain problems. Consider the following benefits of an S corporation:

Pass-through Taxation

S-Corporations enjoy pass-through taxation, which helps to avoid the double taxation faced by C-Corporations. This can result in potential tax savings for shareholders. Pass-through taxation is a tax system where the income, deductions, and credits generated by a business entity, such as New Hampshire General Partnership, limited liability company (LLC), or S-Corporation, are passed through to individual owners or shareholders instead of being taxed at the corporate level.

In this system, business profits and losses are reported on the owners’ or shareholders’ individual tax returns, and taxes are paid at their individual income tax rates. This avoids the issue of double taxation, which occurs in C-Corporations where income is taxed at both the corporate level and again when distributed to shareholders as dividends. Pass-through taxation is generally advantageous for small businesses and their owners, as it simplifies tax filings and often results in lower overall taxes.

Limited Liability Protection

Shareholders of an S-Corporation have limited liability protection, meaning their personal assets are protected from the corporation’s debts and obligations. Limited liability protection in an S-Corporation refers to the legal separation between the personal assets of the shareholders (owners) and the business assets, which protects shareholders from being personally responsible for the company’s debts and legal obligations.

In an S-Corporation, shareholders’ personal assets, such as their homes, cars, and personal savings, are not at risk if the business faces financial difficulties or lawsuits. The shareholders’ liability is limited to the amount they have invested in the company. This limited liability is a significant advantage of incorporating a business as an S-Corporation, as it provides a safeguard for the personal financial well-being of the business owners.

It is important to note that limited liability protection can only be supported if the shareholders maintain proper corporate formalities, such as keeping separate business and personal finances, holding regular shareholder meetings, and maintaining accurate business records. In such cases, courts may “pierce the corporate veil” and hold shareholders personally liable for the company’s debts and obligations.

Transferability of Shares

Shares in an S-Corporation are more easily transferable than those in an LLC, allowing for greater flexibility in ownership changes. Transferability of shares in an S-Corporation refers to the ability of shareholders to sell, gift, or otherwise transfer their ownership interest in the company to another person or entity. This is an important aspect of an S-Corporation’s structure, as it allows for flexibility in ownership and the potential for raising capital through the sale of shares.

However, there are certain restrictions on the transferability of shares in an S-Corporation, which are imposed by the Internal Revenue Service (IRS) to maintain the company’s eligibility for S-Corp status:

  • Shareholders: The number of shareholders in an S-Corporation is limited to a maximum of 100. Only individuals, certain trusts, and estates can be shareholders; other corporations and partnerships are generally not allowed.
  • Eligible Shareholders: Only U.S. citizens and resident aliens can be shareholders in an S-Corporation. Non-resident aliens are not allowed to hold shares.
  • One Class of Stock: S-Corporations can only have one class of stock. All shares must have the same rights and privileges, such as voting rights and distribution preferences. However, differences in voting rights are allowed if they are not tied to economic rights (e.g., distribution preferences).
  • Perpetual Existence: Perpetual existence refers to the concept that a business entity, such as an S-Corporation, can continue to exist indefinitely, regardless of changes in ownership or management. This means the corporation can outlive its original founders and shareholders and continue to operate even if individual shareholders pass away or decide to sell their shares.

This characteristic of an S-Corporation provides stability and continuity for the business, as it ensures that the corporation’s operations, contracts, and legal obligations remain unaffected by changes in ownership. It also makes it easier for the company to attract investors and raise capital. Potential investors can be confident that the business will continue to exist even if the original owners are no longer involved.

Disadvantages of Forming an S-Corporation

Despite these advantages, moving to an S corporation only sometimes makes sense – or at the very least, necessitates a thorough review of certain situations. The following issues may arise in particular:

Restrictions on Shareholders

S-Corporations are subject to specific restrictions, such as a maximum of 100 shareholders and limitations on the types of eligible shareholders (e.g., only individuals, certain trusts, and estates).

Single Class of Stock

S-Corporations are limited to issuing only one class of stock, which can limit flexibility in raising capital or creating different ownership structures. A single class of stock in an S-Corporation refers to the requirement that the corporation only issues one type of stock with equal rights and characteristics for all shareholders. This means that all shares of stock must have the same economic rights, such as dividend distribution preferences and liquidation rights, as well as voting rights. The single class of stock requirement is one of the key criteria the Internal Revenue Service (IRS) sets for a corporation to qualify for S-Corp status.

Increased Complexity

Forming and maintaining an S-Corporation requires more paperwork, record-keeping, and compliance with state and federal regulations than simpler structures like LLCs.

Franchise Tax

S-Corporations in New Hampshire are subject to the annual franchise tax, which can financially burden some businesses.

In an New Hampshire S-Corporation context, the franchise tax is usually based on the company’s income, net worth, or a combination of both. Since S-Corporations are pass-through entities for federal income tax purposes, meaning that their income is not taxed at the corporate level but rather passed through to individual shareholders, they may be exempt from or subject to lower franchise tax rates in some states than traditional C-Corporations.

However, S-Corporations must still comply with New Hampshire franchise tax requirements, which may include annual filings and tax payments. It is crucial for S-Corporation owners to understand the specific rules and regulations in their state of operation and to consult with a tax professional to ensure compliance and minimize their tax.

FAQs

What is an S-corporation in New Hampshire?
An S-corporation in New Hampshire is a type of corporation that is treated differently than a traditional corporation for tax purposes.
What are the benefits of forming an S-corporation in New Hampshire?
S-corporations offer benefits such as lower taxes, simplified reporting requirements, and limited liability protection for shareholders.
How do I form an S-corporation in New Hampshire?
To form an S-corporation in New Hampshire, you need to file a combination of state and federal documents and meet certain eligibility requirements.
What is the eligibility requirement to form an S-corporation in New Hampshire?
To be eligible to form an S-corporation in New Hampshire, your corporation must have no more than 100 shareholders and only one class of stock.
Do I need to file any documents with the state to form an S-corporation in New Hampshire?
Yes, you need to file articles of incorporation with the New Hampshire Secretary of State’s office to form an S-corporation in New Hampshire.
What is the cost of forming an S-corporation in New Hampshire?
The cost of forming an S-corporation in New Hampshire depends on the state filing fee, registered agent fees, and attorney fees, if needed.
What type of stock can an S-corporation issue in New Hampshire?
An S-corporation in New Hampshire can only issue one class of stock, which means that all shareholders are equal.
Do I need to elect S-corporation status with the IRS to form an S-corporation in New Hampshire?
Yes, you need to file Form 2553 with the IRS to elect S-corporation status for your corporation in New Hampshire.
What is the deadline to elect S-corporation status in New Hampshire?
You need to file Form 2553 with the IRS within 75 days of incorporating your corporation in order to elect S-corporation status for your New Hampshire corporation.
What are the tax benefits of operating an S-corporation in New Hampshire?
S-corporations in New Hampshire are not subject to federal income tax. Instead, the corporation’s income is passed through to the shareholders and taxed at each individual’s tax rates.
Who is liable for the debts of an S-corporation in New Hampshire?
Shareholders of an S-corporation in New Hampshire are generally not personally liable for the debts of the corporation, although there are exceptions to this rule.
Can a New Hampshire S-corporation have more than one class of stock at any given time?
No, a New Hampshire S-corporation can only have one class of stock at any given time.
Can S-corporation status be terminated in New Hampshire?
Yes, S-corporation status can be terminated in New Hampshire by filing the appropriate form with the IRS.
What are the formalities that a New Hampshire S-corporation has to comply with?
It is essential to follow important formalities such as holding regular meetings, keeping accurate corporate books and records, and operating in compliance with the corporation’s governing documents.
Will a New Hampshire S-corporation holders has the protection of the corporate veil?
In most circumstances, the shareholders of a New Hampshire S-corporation will have the protection of the corporate veil.
Does a New Hampshire S-corporation need to pay a state income tax?
No, New Hampshire companies are not subject to a state income tax as of 2021, regardless of their legal structure.
Can the shareholder of a New Hampshire S-corporation be held accountable for its payroll taxes?
While the corporation may be responsible for its own payroll taxes, the shareholders typically do not have liability for these obligations unless they are involved in the day-to-day running of the corporation.
Can an out-of-state S-corporation register in New Hampshire?
Yes, an out-of-state S-corporation can register to do business in New Hampshire.
Are New Hampshire S-corporations of LLCs required to have a registered agent?
Yes, New Hampshire S-corporations or LLCs must have a registered agent in the state.
What is the role of the registered agent in a New Hampshire S-corporation?
The registered agent receives important legal documents on behalf of the New Hampshire S-corporation and ensures that these documents are properly handled and filed.
How do I maintain my S-corporation status in New Hampshire?
You will need to have the company’s shareholders approve of electing single-taxation status and consistently follow the New Hampshire S-corporation formalities.
What record-keeping requirements exist for a New Hampshire S-corporation?
New Hampshire S-corporation must follow basic financial and supply tax documents, including the company’s tax documents, asset or property logs, and income statements.
Can every business qualify to become an S-corporation in New Hampshire?
Every company that meets the eligibility requirements can potentially qualify to become an S-corporation in New Hampshire, however, eligibility may be subject to state and federal law modifications.
How often does an S-corporation in New Hampshire need to hold meetings?
There is no mandated frequency of meetings, but you need to hold a minimum of one shareholder meeting per year to permanently keep their S-corporation status.
Can an S-corporation make independent charitable donations that exceed its capital?
Yes, an S-corporation can make donations outside of its equity so long as it is solely designated for charitable purposes.
Is filing a dual status help prevent double taxation at the New Hampshire S-corporation entity level for tax purposes?
Dual status filing under subpart F only can structure distributable income such that amounts found to be undistributed would reduce the current year-entity-level taxes payable, however, it depends on the particular details of the case.
How does an S-corporation-based policy-holding from life insurance or an IRA invest that is owned by an S-corporation present itself tax-wise in New Hampshire?
Prop. Reg Section 1.1361-1T similarly contained a qualified subchapter of an insurance company exception based on income from long-term continuing business casetop and this section was involved in treatment or distribution.
What is an S-Corporation in New Hampshire?
S-Corporation in New Hampshire is a type of corporation that avoids double taxation by passing income, losses, deductions, and credits through to the shareholders.
What is the process of incorporating in New Hampshire?
The process of incorporating in New Hampshire involves filing Articles of Incorporation with the Secretary of State, obtaining a Tax Identification Number, and complying with state tax requirements.
Can only residents of New Hampshire start an S-Corporation in the state?
No, anyone can start an S-Corporation in New Hampshire as long as they meet the requirements.
Are there any requirements to start an S-Corporation in New Hampshire?
Yes, the requirements to start an S-Corporation in New Hampshire include obtaining a Tax Identification Number, appointing a registered agent, and filing Articles of Incorporation.
What is the fee to incorporate an S-Corporation in New Hampshire?
The fee to incorporate an S-Corporation in New Hampshire is $100.
How long does it take to incorporate an S-Corporation in New Hampshire?
In New Hampshire, the process of incorporation takes about two weeks.
Can a New Hampshire LLC be converted into an S-Corporation?
Yes, a New Hampshire LLC can be converted into an S-Corporation.
How is an S-Corporation taxed in New Hampshire?
An S-Corporation in New Hampshire is not subject to state-level income taxes, but shareholders must report their share of income and losses on their federal individual income tax returns.
Are there any specific business activities prohibited from incorporating as an S-Corporation in New Hampshire?
No, there are no specific business activities prohibited from incorporating as an S-Corporation in New Hampshire.
Can a foreign national start an S-Corporation in New Hampshire?
Yes, a foreign national can start an S-Corporation in New Hampshire.
How many shareholders can an S-Corporation have in New Hampshire?
An S-Corporation in New Hampshire can have up to 100 shareholders.
Do shareholders of an S-Corporation in New Hampshire have personal liability for the company’s debts?
Generally, no, shareholders of an S-Corporation in New Hampshire are not personally liable for the company’s debts.
What is the minimum number of shareholders required to start an S-Corporation in New Hampshire?
There is no minimum number of shareholders required to start an S-Corporation in New Hampshire.
Is there a limit for the amount of money that can be raised through an S-Corporation in New Hampshire?
No, there is no limit to the amount of money that can be raised through an S-Corporation in New Hampshire.
Can an S-Corporation in New Hampshire own property?
Yes, an S-Corporation in New Hampshire can own property.
How can an S-Corporation in New Hampshire distribute profits to shareholders?
An S-Corporation in New Hampshire can distribute profits to shareholders in the form of dividends.
Do S-Corporations in New Hampshire need to hold shareholder meetings?
No, there is no requirement for S-Corporations in New Hampshire to hold shareholder meetings.
Can a single person be the owner and employee of an S-Corporation in New Hampshire?
Yes, a single person can be the owner and employee of an S-Corporation in New Hampshire.
What are the record-keeping requirements for S-Corporations in New Hampshire?
S-Corporations in New Hampshire are required to maintain accurate and complete business records for tax purposes.
Is an S-Corporation also required to pay federal income taxes?
No, an S-Corporation in New Hampshire is not required to pay federal income taxes.
What are the personal tax implications of owning an S-Corporation in New Hampshire?
Owners of an S-Corporation in New Hampshire are generally subject to personal income tax on their share of the company’s profits.
Can an S-Corporation in New Hampshire make political contributions?
No, an S-Corporation in New Hampshire cannot make political contributions.
Are S-Corporations in New Hampshire required to obtain business licenses?
Yes, S-Corporations in New Hampshire are generally required to obtain business licenses.
How often does an S-Corporation in New Hampshire need to file annual reports?
S-Corporations in New Hampshire are required to file their annual report every year by the end of the fifteenth day of the third month after the close of its fiscal year.
Can an S-Corporation in New Hampshire go public?
Yes, an S-Corporation in New Hampshire can go public.
Is a physical presence or office space required to start an S-Corporation in New Hampshire?
No, physical presence or office space is not required to start an S-Corporation in New Hampshire.
Does an S-Corporation in New Hampshire need to file a separate federal tax return?
No, an S-Corporation in New Hampshire does not need to file a separate federal tax return.
Can an S-Corporation in New Hampshire hire employees?
Yes, an S-Corporation in New Hampshire can hire employees.

Also Read

Why You Should Start New Hampshire S Corp

One of the primary advantages of forming an S Corp in New Hampshire is the potential tax benefits it offers. S Corporations are classified as pass-through entities, which means that the business itself is not taxed separately from its owners. Instead, profits and losses are passed through to shareholders who report them on their individual tax returns. This can result in significant tax savings for business owners, as they may be able to avoid paying self-employment taxes on their income.

In addition to tax benefits, incorporating as an S Corp can also provide liability protection for business owners. By establishing a separate legal entity, such as an S Corporation, you can shield your personal assets from any potential business debts or legal liabilities. This can offer peace of mind and security for entrepreneurs who want to protect their personal finances from any risks associated with running a business.

Furthermore, New Hampshire offers a business-friendly environment with a low tax burden and a strong support system for small businesses. The state has a competitive business climate with a stable economy and a skilled workforce, making it an attractive location for entrepreneurs looking to start or expand their business operations. Additionally, New Hampshire does not impose a state income tax on individuals or corporations, which can further benefit businesses looking to maximize their bottom line.

Another reason to consider starting an S Corp in New Hampshire is the flexibility it offers in terms of ownership structure and governance. S Corporations can have up to 100 shareholders and can issue different classes of stock, allowing for more diverse investment opportunities. Additionally, S Corps can be managed by a board of directors and officers, providing clear roles and responsibilities for decision-making within the company.

Overall, forming an S Corporation in New Hampshire can provide significant advantages for new business owners, including tax benefits, liability protection, and operational flexibility. By taking the time to understand the implications of choosing this business structure and consulting with legal and financial professionals, entrepreneurs can position their business for success in the long run. If you are looking to start a new business in New Hampshire, considering an S Corp structure may be a strategic decision that can pave the way for growth and prosperity.

Conclusion

Forming an S-Corporation in New Hampshire can be a beneficial decision for small business owners seeking liability protection, pass-through taxation, and easier transfer of ownership. By meeting the requirements set by the IRS and following the necessary steps, business owners can take advantage of an S-Corp’s unique structure and benefits. However, it is essential to consider the potential drawbacks, such as increased paperwork and limitations on ownership, before making a final decision. Consulting with a legal or financial professional can help business owners determine if an S-Corporation is right for their needs and goals.

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