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Starting an LLC is a wise decision whether you’re launching a new enterprise, expanding an existing one, or becoming a partner. It offers your company greater flexibility, and tax advantages, and safeguards your personal assets from business liabilities.
Nevertheless, the process of forming an LLC varies slightly from state to state, as certain states use distinct terminology and impose specific prerequisites. This guide will discuss the important steps for forming an LLC in New Hampshire. Read on.
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Pros and Cons of Starting LLC in New Hampshire
Similar to any other form of business structure, a Limited Liability Company (LLC) has its own set of pros and cons. Below, we’ll explore some of them.
Pros
Here are the benefits of LLC in New Hampshire
Fewer Formalities
In terms of business structure, corporations, and LLCs have different requirements for maintaining their legal status. Strict formalities must be adhered to by corporations, such as conducting regular meetings of the board of directors and shareholders, maintaining written corporate minutes, and submitting annual reports to the state. These formalities can be time-consuming and costly, but they are necessary for corporations to comply with legal regulations and maintain their corporate status.
On the other hand, LLCs offer more flexibility and fewer formalities. LLCs do not have to hold regular meetings, which can help reduce complications and paperwork for the members and managers of the company. While LLCs still need to file an annual report with the state, the requirements for maintaining an LLC are generally less burdensome than those for a corporation.
Lack of Ownership Restrictions
When it comes to business ownership, S-corporations, and LLCs have different rules and restrictions. The number of stockholders that an S-corporation can have is limited to a maximum of 100. Moreover, every stockholder of an S-corporation must be a U.S. citizen or resident individual. This means that S-corporations cannot have foreign individuals or entities as stockholders, and they cannot exceed the limit of 100 stockholders.
On the other hand, LLCs have no such restrictions on ownership. An LLC can have an unrestricted number of members, comprising of individuals, other LLCs, corporations, or even foreign entities. This makes LLCs a popular choice for businesses that have a large number of owners or want to attract investment from a diverse group of individuals or entities.
Cash Method of Accounting
The cash method of accounting is available to most LLCs, providing benefits in terms of flexibility and simplicity.
By using the cash method of accounting, an LLC’s income is not recognized until it is actually received, which can help to smooth out cash flow and better reflect the financial health of the business. This can be particularly beneficial for businesses that experience fluctuations in their income, as the cash method allows for a more accurate reflection of the timing of cash flows.
Cons
Social Security and Medicare Taxation on Profits
When it comes to taxes, the ownership structure of a business can have a significant impact on the amount of taxes owed. While LLCs offer many benefits, including flexibility and reduced formalities, they may also result in higher tax liabilities for their owners.
One factor that can contribute to higher taxes for LLC owners is the self-employment tax. In contrast to corporations, wherein only salaries are subject to social security and Medicare taxes, an LLC’s salaries and profits are both liable to self-employment taxes.
The present combined rate of such taxes is 15.3%. Therefore, LLC owners may have to pay higher social security and Medicare taxes than corporation owners who are only obligated to pay these taxes on their salaries.
Profits Must Immediately Be Recognized By the Owners
An LLC is exempt from double taxation, implying that the LLC profits are automatically incorporated into a member’s income. This means that owners of an LLC must immediately recognize any profits generated by the business, regardless of whether the profits are actually distributed to the owners.
As a result, owners of an LLC may have a higher tax liability than shareholders in a C-corporation, who are only taxed on dividends when they are received.
7 Steps to Start LLC in New Hampshire
Here are 7 steps that show you how to open LLC in New Hampshire
1. Check If Your Desired Name Is Available
Begin by verifying the availability of your preferred company name. You may conduct a business search on the website of the New Hampshire Secretary of State to accomplish this. It’s crucial that your business name is distinguishable from existing companies registered in New Hampshire to avoid confusing consumers.
If your search results show that similar names already exist, you’ll need to come up with a unique and different name. This might take several attempts, but it’s necessary to prevent your filing from being rejected.
Once you have selected a name, you can reserve it by submitting an Application for Reservation of Name. This process incurs a fee of $15, and the reservation remains valid for 120 days.
2. Find a Registered Agent
In New Hampshire, a registered agent is an essential component of every LLC, acting as the official point of contact for legal documents, including subpoenas, lawsuits, and other official correspondence. Having a registered agent is a legal requirement for LLCs operating in the state, and failing to have one can lead to significant legal and financial consequences.
An LLC’s registered agent can be an employee, member, or a hired representative, such as an attorney or a professional registered agent service. The registered agent must be available during typical business hours to accept legal documents on behalf of the LLC.
In New Hampshire, if an individual is functioning as the registered agent, they must reside in the state and possess a physical address situated within New Hampshire. This address functions as the registered office and must be a physical site where the registered agent can receive legal documents personally. The registered office address must be included in the LLC’s Certificate of Formation and must remain current and accurate at all times.
3. Purchase Your Domain Name
Securing a domain name for your LLC is a crucial step in establishing an online presence and creating brand recognition. It is crucial to prioritize the reservation of your domain name to guarantee the availability of your desired business name or catchphrase as an online identity. Your domain name serves as the address of your website and is typically the initial point of contact for prospective customers or clients.
While a domain name is not mandatory for LLC formation, it is essential for building a website and establishing an online presence. Your website is a powerful tool for marketing your business, attracting new customers, and generating revenue. A well-designed website can also provide credibility and legitimacy to your business, making it easier to establish trust with potential clients.
4. Register Your LLC in New Hampshire
To set up your LLC in New Hampshire, you can submit the Certificate of Formation through two methods: online or by mail. The filing fee is $100, but if you file online, an additional fee of $2 is applicable, bringing the total to $102. You should receive a copy of your file-stamped certificate within 30 days. Payment can be made through check or other accepted payment methods payable to the “State of New Hampshire.”
The application form is two pages long and asks for critical details such as your LLC’s name, primary address, business type, management structure, and registered agent’s name and address. A member or manager of the LLC must sign the application.
5. Draft an Agreement for Operation
Although not compulsory, an operating agreement is a vital document which delineates the operations of the company and the responsibilities and contributions of its members. It’s particularly essential for multi-member LLCs to avoid any confusion or miscommunication regarding the members’ responsibilities and rights. It’s advisable to have a copy of the operating agreement in your business’ record book plus the Certificate of Formation that has been stamped.
6. Obtain an Employer Identification Number
The majority of LLCs are obligated to obtain an EIN, which is a nine-digit identification number issued by the Internal Revenue Service (IRS). The EIN is a federal prerequisite. You can obtain an EIN at no cost by completing a quick online application on the IRS website. The application process is convenient and only takes a few minutes.
7. Submit a Report Annually
After forming an LLC in New Hampshire, you must file an annual report that verifies any updates in members, addresses, or registered agents. You can complete this task through the online portal, and it must be done by April 1 every year, irrespective of the company’s fiscal year. There is a $100 fee for filing the report, and a $50 late fee is imposed for reports submitted after the April 1 deadline.
FAQs on Starting LLC in New Hampshire
Do you have any more questions on starting LLC in New Hampshire? Below are the responses to some of the frequently asked questions regarding the process of establishing an LLC in New Hampshire:
Conclusion
To establish an LLC in New Hampshire, you must engage in meticulous planning and comply with all legal requirements. This entails selecting an exclusive business name and designating a registered agent, among various other obligations.
By executing these measures and seeking expert advice if necessary, you can embark on your journey as a New Hampshire business proprietor with assurance, ensuring the durability and profitability of your LLC.
