When you start your LLC in New Hampshire, you must pay taxes with the New Hampshire Revenue Department.
To help you start your tax filing process, we sought legal assistance from our certified business accountants and lawyers who have been in the field for over eight years.
We spent four weeks analyzing the New Hampshire official tax website.
Here's a comprehensive guide on LLC taxes in New Hampshire.
- The employee and the employer withhold 7.65% of their taxable salaries in New Hampshire, resulting in a federal tax rate of 15.3%.
- The New Hampshire Business Profits Tax is levied on income earned from doing business in the state.
- The New Hampshire Business Profits Tax is 7.6% on gross income above $92,000.
How Are LLCs Taxed in New Hampshire?
LLCs in New Hampshire are taxed as pass-through entities, with LLC members paying federal income tax on their filings.
The number of members determines the tax classification of your New Hampshire LLC. By default, single-member LLCs are taxed as sole proprietors, whereas multi-member LLCs are taxed as general partnerships.
Unless members choose otherwise, LLCs are pass-through entities, which means revenue passes through and is reported on personal income tax returns by members.
Meanwhile, the LLC is not subject to corporate state income tax but may be liable to state-level profits tax and business enterprise tax.
State Taxes for New Hampshire LLCs
1. Single-Member LLCs
A single-member LLC is normally exempt from taxes.
Under US tax law, a single-member LLC is presumed to be owned by an individual (instead of another LLC). Hence, US tax law treats it as a sole proprietorship.
The LLC's single owner is considered the LLC's sole proprietor and must file the Self-Employment Tax on all of the LLC's earnings.
Because New Hampshire has no state income tax, a single-member LLC needs only submit the federal income tax.
2. Multi-Member LLCs
Any limited liability company with more than one owner is known as a multi-member LLC and is taxed as a partnership by default.
This LLC, like the single-member LLC, is a pass-through entity. This implies that the LLC's income is passed on to the members, who must pay estimated taxes on their own profits.
If individuals directly own the multi-member LLC, it is free from the Franchise Tax. Members of the multi-member LLC must also pay Self-Employment Tax and Federal Income Tax.
3. LLCs Taxed as S-Corp
Your LLC can apply to be taxed as an S-corporation by completing Form 2553 with the IRS . Taxing as an S-corporation can assist firms (with established profitability) save money on self-employment taxes.
S-corporations pay no corporate state income tax and can make member distributions without paying the 15.3% federal self-employment tax on such payouts.
Only firms having a US origin and a specified number of shareholders and shares can become S-corps.
4. LLCs Taxed as C-Corp
By submitting form 8832 (the Entity Classification Election Form) to the Internal Revenue Service (IRS), an LLC can elect to be recognized as a C-corporation.
An LLC that is taxed as a C-corporation is not a pass-through entity.
The members, shareholders, or owners of a C-corporation are taxed individually.
The dividends received by C-corporation shareholders are taxed twice.
"Dividends paid to shareholders are taxed both at the corporate level (via Form 1120) and at the shareholder level (via Form 1040)."
- John Cunningham, Concord Tax & Business Lawyer
Shareholders are also liable to federal income tax.
Federal Taxes for New Hampshire LLCs
Your New Hampshire LLC is required to complete the following federal taxes.
1. Federal Income Tax
You must pay regular federal income tax on any business profits your New Hampshire LLC earns. Your wages, current tax bracket, deductions, and filing status determine your New Hampshire business income tax liability.
Only your earnings from the firm are subject to federal income tax, minus certain deductions and exemptions. This covers your tax-free funds, company expenditures, and other deductions.
2. Federal Self-Employment Tax
All members or managers who profit from the LLC must pay self-employment tax.
The Federal Insurance Contributions Act (FICA) administers this levy, which funds social security, Medicare, and other benefits. The current rate of self-employment taxation is 15.3%.
You can deduct part of your company expenditures from your New Hampshire business income when establishing the amount of self-employment tax you owe.
Additional taxes that your organization has to pay in New Hampshire include:
1. Local Taxes
In New Hampshire, all city and county taxes are levied under property tax. Aside from a company license in the city or county where you operate, your LLC will most likely only pay local taxes if it owns its property (or pays indirectly through rental payments).
Local property taxes vary, but the average property tax rate in New Hampshire is approximately 1.86%.
2. New Hampshire Sales Tax
A seller's permit is a license that permits you to collect sales tax on retail sales in your state of operation.
Unlike other states, New Hampshire does not have a state sales tax. This implies that if your LLC sells things to New Hampshire clients, you do not need to register for sales tax in the state.
However, if you sell items to clients outside of New Hampshire, you may be required to collect sales tax for the state where those customers reside.
3. Interest and Dividends Tax (I&D)
As a business owner, you must typically pay income tax on any earnings paid to yourself.
Individuals and limited liability companies (LLCs) must pay the Interest and Dividends Tax on any gross interest and dividend income over $2,400 a year.
The I&D tax rate is now 5%. However, it will be reduced to 4% by the end of 2023 when New Hampshire begins to phase out the I&D tax. You can, however, file the I&D tax return with Form DP-10 .
4. Industry Tax
The New Hampshire Department of Revenue additionally levies taxes on various sectors in the state, including:
- Tobacco Tax
- Communications Services Tax
- Timber Tax
- Electricity Consumption Tax
- Gravel/Excavation Tax
New Hampshire State Employer Taxes
New Hampshire employers must pay unemployment insurance and workers' compensation taxes.
Workers' Compensation Tax
Employers in New Hampshire must obtain workers' compensation insurance for all employees (LLCs with less than four members are exempt from this requirement, but it is required if a fourth person joins).
Rates vary depending on claim history and the risk inherent in the employees' work, but the cost in New Hampshire averages out to 90 cents per $100 of payroll.
Companies that don't provide workers' compensation coverage may face a $2,500 basic charge plus an additional $100 per employee daily without coverage.
Unemployment Insurance (UI) Tax
The first $14,000 of an employee's annual salary is subject to a percentage tax for unemployment insurance.
For the first year of operation, new employers pay 2.7%. After that, each September, a new rate is released. Family members who work for an LLC are not required to be covered by unemployment insurance.
New Hampshire Business Enterprise Tax
The Business Enterprise Tax is levied on a company's enterprise value tax base; the total of all compensation and interest paid or incurred by the company or its gross revenues.
The rate of the Business Enterprise Tax is 0.55%. To qualify for this tax, gross receipts and enterprise value tax base totals must exceed $250,000.
Is New Hampshire a Tax-Friendly State?
Yes, New Hampshire is a tax-friendly state, primarily because it has no sales tax.
Is New Hampshire a No-Income Tax State?
Yes, New Hampshire is a no-income tax state. New Hampshire has no state income tax or sales tax. When compared to other states, New Hampshire has fairly high property taxes.
Do You Need Help With Your New Hampshire LLC Taxes?
Filing your New Hampshire LLC taxes is mandatory to keep your NH LLC in good standing.
We recommend using QuickBooks to help you automate and improve the accuracy of your accounting tasks like bookkeeping, invoicing, time management, cost monitoring, and inventory tracking.
QuickBooks will also create reports like balance sheets, profit and loss statements, and sales tax liability, allowing you to obtain the data needed to complete your tax forms properly.