LLC vs S-Corp in New Hampshire

New Hampshire has no state personal income tax on wages or salaries. New Hampshire does, however, impose the Business Profits Tax (BPT) and the Business Enterprise Tax (BET) on business entities, including LLCs and S corporations. This changes the LLC vs S-corp math compared to other New England states. The New Hampshire Secretary of State handles entity formation. The IRS handles federal tax classification via Form 8832 and Form 2553. New Hampshire LLC basics. - Certificate of Formation filed with the New Hampshire Secretary of State, Corporation Division, under the New Hampshire Revised Limited Liability Company Act (RSA 304-C). - Current formation filing fee is published on the Secretary of State's fee schedule; verify before filing. Source: NH Secretary of State Corporation Division (https://www.sos.nh.gov/corporate-division). - NH LLCs file an Annual Report with the Secretary of State each year. - Single-member LLCs default to disregarded entity for federal tax. Multi-member LLCs default to partnership tax. Either can elect S corp treatment with IRS Form 2553. New Hampshire state business taxes: apply to LLCs and S corps alike. - Business Profits Tax (BPT): imposed on the net income of every business organization (corporation, LLC, partnership, proprietorship) with gross business income above the filing threshold ($109,000 for tax periods ending on or after December 31, 2024, per the NH Department of Revenue Administration). Rate is 7.5% of taxable business profits for tax periods ending on or after December 31, 2023 (verify current rate with the DRA as rates phase periodically). Source: NH DRA Business Profits Tax (https://www.revenue.nh.gov/taxes-glance/business-profits-tax). - Business Enterprise Tax (BET): imposed on the enterprise value tax base (sum of compensation paid, interest paid, and dividends paid) for every business enterprise above the filing thresholds. Rate is 0.55% for tax periods ending on or after December 31, 2023. BET paid can generally be credited against BPT owed. Source: NH DRA Business Enterprise Tax (https://www.revenue.nh.gov/taxes-glance/business-enterprise-tax). Federal S corp election in New Hampshire. - New Hampshire does not recognize a separate federal S corp election for BPT purposes. An S corporation is taxed on its net profits at the entity level under the BPT, even though federally the income flows through to shareholders. This is unusual; most states respect the federal S election for income-tax purposes. - The absence of a New Hampshire personal income tax on wages means the federal self-employment-tax savings from an S corp election still apply (federal payroll tax on wages only; distributions avoid federal SE tax), but the NH BPT applies to the entity's profits regardless. Why a New Hampshire trades shop might still elect S corp. Primarily for federal self-employment tax savings, which exist independent of New Hampshire's BPT/BET regime. The entity-level BPT on S corp profits partially offsets the attractiveness of the S election compared to a state like Texas or Florida with no comparable tax. Rule of thumb. Start as a New Hampshire LLC. Run the federal payroll-tax math against the New Hampshire BPT/BET cost with a CPA familiar with New Hampshire's unusual entity-level taxation of S corps before electing. The decision is more complex here than in states that follow the federal pass-through treatment.