If you’ve been thinking about turning your hobby into a full-time job, or you have an idea for a product that people can’t live without, then New Hampshire is a business-friendly state in which to incorporate your new venture. New Hampshire’s tax burden is low for business owners, and there is no general sales or personal income tax either, making it an attractive prospect for potential employees. However, there are several obligations that any prospective business must meet, so it’s important to learn the process to register a business in NH from start to finish.
Making a Business Plan
It’s an obvious but tremendously important question when registering a new company: What’s my business going to be? Start by conducting a brainstorming session about your overall business idea. Ask yourself questions like:
- What can I make or what services can I provide?
- Do I see a problem in my community that my company can fix?
- What am I passionate about?
- What is my starting budget?
- Do I have any additional sources of income?
- Where would I like my business to be in five years? 10 years?
Questions like this can help you focus your ideas on the beginnings of a business plan. You may also find it helpful to draft a Mission Statement or formal declaration of the purpose of your new business. Referring back to this original idea can help you make business decisions later on as well. After that, identify some formal goals you’d like to accomplish in a reasonable timeframe and write down your plan to accomplish them. If you plan on seeking funding from investors, many might ask to see your business plan—or at the very least, expect you to explain it to them.
Once you have an idea of what your business will do, it’s time to familiarize yourself with the formal and legal process for making your company a reality.
Understanding the Business Types
The first step to registering a new business in New Hampshire is to decide on the business entity that best serves your budget and business goals. There are several classifications of business, and each one comes with its own set of tax laws, asset protection, and levels of liability. When starting a business you can choose between a DBA, Corporation, or Limited Liability Company.
A DBA stands for “Doing business as,” and is simply a name that either an individual (known as a “sole proprietor”) or a partnership can do business under—it is sometimes known as “Fictitious Business Name” or “Trade Name.” A DBA does not create a different, taxable business entity and offers little in the way of liability protection, but is also taxed the least of the three.
A Corporation is an entity that pays its own taxes separately from the personal taxes of its owners or operators. Corporations offer a great deal of liability protection in the case of lawsuits, but the structure requires a staff of officers, a board of directors, and shareholders. It is ideal for businesses looking to raise funding and expand quickly. Corporations are taxed more heavily under federal law. Corporations are also more complicated and require the owners to be paid as employees and you also need to decide if you want to be taxed as a C Corporation or an S Corporation.
An LLC or “Limited Liability Company” is sometimes seen as the best of both worlds, offering a lesser tax obligation than a corporation and a less complicated management structure. LLC’s are NOT separate, taxable entities for Federal Income Taxes, but are completely separate for New Hampshire taxation.
After taking your business plan and realistic description of your assets into account, deciding on a business classification will affect everything from how much you will pay in taxes to how many employees you can hire. It’s important to choose the right business classification the first time as reclassifying your business is complicated and difficult.
After making some of the initial big decisions about your company, New Hampshire requires a several-step process to legitimize new businesses.
Choose a Name:
Business names must be unique so as to avoid confusion and copyright infringement. This is especially true if you intend to operate nationally or even internationally.
It’s important to conduct a primary internet search to check if your potential business name is already being used. You can also use resources like a trademark search through the US Patent and Trademark Office, or check locally with the New Hampshire Business Entity Database. It’s also important to pick a name that can be registered on an online domain if you’re planning on doing business online, and one that can be easily understood on branding materials.
Register Your Business With the State:
Sole proprietorships and partnerships do not require a state filing but do require a small fee. For other classifications, you must first file a document called the “Articles of Organization” with the New Hampshire Secretary of State—either the LLC or Corporation Division. LLC’s can hold a single person “Organizational Meeting” to ratify the Operating Agreement, but Corporations must also meet to determine the percentage of ownership for each shareholder as well decide on aspects like a company bank account, payback pre-incorporation expenses, elect S-Corporation status, and more.
Obtain All Necessary Permits and Licenses:
Inquire with state representatives and industry officials about any special licenses you need to do business in New Hampshire. These can vary greatly from business to business, but they typically require that certain standards be met while your company is operating, and usually require a fee or special set of taxes.
Get Your Employee Identification Number:
Your Employee Identification Number (EIN) is used by state and federal authorities to identify your business and is a necessary part of most tax documents.
Figure Out Your Finances:
Aside from a detailed budget, you may want to consider investing in an accounting system or pay small business tax accountants to help you navigate your tax burden for you. It is also customary for businesses to keep transaction records for at least three years, so establishing a reliable bookkeeping system is also essential. Appletree Business specializes in providing bookkeeping services to small businesses. You may also consider opening a bank account or line of credit specifically for your business.
Recognize Your Annual Obligations:
After you’ve successfully registered your new company, there are ongoing requirements that you must meet every year or so. DBA registration should be valid for 5 years, at which point you’ll need to renew it with the county authorities. New Hampshire LLCs and corporations must file an annual Periodic Report with the New Hampshire Secretary of State on or before April 1.
Healthy businesses usually have some sort of marketing and branding identity to advertising services, demonstrate company values, and drive sales. Working with a marketing or branding agency can take the guesswork out of the progress if you don’t have any first-hand experience. Obtaining business insurance can also be beneficial in the case of lawsuits or accidents, although you will have to pay a monthly fee of around a few hundred dollars—depending on the size of your business and the scope of your work.