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Editorial 9 MIN READ

New Hampshire in February 2020: the state with no income tax and two business taxes

A $100 Certificate of Formation, a $100 annual report due April 1, and a BPT-BET combination that quietly collects what the wage tax does not

The Editors
Staff, Incorporator.org
9 min read Updated
Contents 6 sections
  1. The mechanics
  2. The annual report, due April 1
  3. The tax picture, which is where New Hampshire earns its reputation back
  4. The registered-agent market, and what to expect locally
  5. Who this state actually makes sense for
  6. Sources

New Hampshire LLC costs $100 to form and $100 a year to keep. The state has no general income tax on wages, which is the line the tourism office leads with, and two business-level taxes that the tourism office does not mention.

This is a guide for someone forming a New Hampshire LLC in February 2020, written for a reader who already knows what an LLC is and wants the state mechanics without throat-clearing. The cheap headline fee is real. The tax picture has more texture.

The mechanics

You file a Certificate of Formation with the New Hampshire Secretary of State's Corporation Division under the New Hampshire Revised Uniform Limited Liability Company Act, N.H. Rev. Stat. Ch. 304-C, which took effect on January 1, 2013 and replaced the older Chapter 304-C as the governing LLC statute. The filing fee is $100. You can file on paper (Form LLC-1) by mail or walk-in at 107 North Main Street in Concord, or online through the NH QuickStart portal. Online is what the Corporation Division pushes, and it is what you should use unless you have a reason not to.

The Certificate itself is short. You supply the LLC's name (which must include "Limited Liability Company," "LLC," or "L.L.C." per § 304-C:32), the nature of the primary business, the address of the principal office, the name and address of the registered agent in New Hampshire, and the signature of an authorized person. If the LLC is to be manager-managed rather than member-managed, you say so; the default under § 304-C:85 is member management. Durations default to perpetual. There is no need to list members or the operating agreement on the public filing.

Processing on QuickStart is typically same-day to one business day for standard submissions. Paper filings sit in a queue measured in several business days, longer around the April 1 annual-report crunch. New Hampshire does not operate a tiered expedite menu comparable to Delaware's. If you need faster, file online.

You will then want an EIN (IRS Form SS-4, issued in the time it takes to fill out the online application) and an operating agreement. New Hampshire does not require you to file the operating agreement and does not require it to be in writing, but § 304-C:41 recognizes it as the governing document for the LLC's internal affairs. If you have co-members, put it in writing. The statute will fill gaps, but the gaps it fills are not the ones two co-founders usually argue about.

For federal tax purposes, the LLC defaults to a disregarded entity (single-member) or a partnership (multi-member). You can elect S-corp treatment on Form 2553, or C-corp on Form 8832, if the business math supports it. New Hampshire taxes the entity at the business level regardless of the federal election, a detail worth internalizing before you pick a state for your operating company.

The annual report, due April 1

Every New Hampshire LLC files an annual report with the Secretary of State each year. The filing fee is $100 and the report is due on or before April 1. The report is a light-touch form: it confirms the registered agent, the principal office, and the managers or member-managers, and asks for a business email and NAICS code. You can file it through QuickStart in a few minutes.

Miss April 1 and you are in delinquency. The Corporation Division sends reminders in late winter, then moves the LLC toward administrative dissolution under § 304-C:143 if the report and fee remain outstanding. Reinstatement after administrative dissolution is mechanical but annoying: you file the overdue annual reports, pay the accumulated $100 fees, and pay a reinstatement fee on top. It is cheaper to calendar April 1 than to pay for the paperwork that cleans up a missed one.

If the LLC is newly formed after the previous April 1, it is not required to file that year's annual report; the first annual report is due April 1 of the calendar year following formation. Forming in March of a given year means the first annual report is due just over a year later, in April of the following year. This is one of the few places where New Hampshire's calendar is friendlier than the midyear franchise taxes that states like Tennessee and Arkansas assess on the anniversary of formation.

The tax picture, which is where New Hampshire earns its reputation back

The story told to out-of-state founders is that New Hampshire has no income tax. The true sentence is that New Hampshire has no general individual income tax on wages and no general sales tax. Both are accurate; neither is the whole picture.

The state does tax interest and dividend income received by individuals, partnerships, and fiduciaries under the Interest and Dividends Tax, at 5%, per N.H. Rev. Stat. § 77:1 et seq., with a $2,400 per-taxpayer exemption ($4,800 joint) and additional exemptions for taxpayers 65 or older, blind, or disabled. The 2019 New Hampshire budget, passed as HB 4 in the 2019 legislative session, put the I&D tax on a phase-down path contingent on revenue triggers, with a scheduled full repeal if the triggers hit on schedule. For a 2020 formation, the tax is still in place at 5%.

The two taxes that matter to the LLC itself are the Business Profits Tax (BPT) and the Business Enterprise Tax (BET).

The BPT, codified at N.H. Rev. Stat. Ch. 77-A, applies to the taxable business profits of every "business organization" doing business in the state, including LLCs, whether the LLC is taxed federally as a partnership, a disregarded entity, or a corporation. The tax rate for taxable periods ending on or after December 31, 2019 is 7.7%, down from 7.9% and subject to further rate reductions under the same HB 4 budget trigger framework that governs the I&D phase-down. The BPT filing threshold is gross business income over $50,000; below that, no BPT return is required, which matters enormously for small single-member LLCs that New Hampshire otherwise treats the same as a multinational on paper.

The BET, codified at N.H. Rev. Stat. Ch. 77-E, is the one that surprises outsiders. It is a tax on the "enterprise value tax base," which is the sum of compensation paid, interest paid, and dividends paid by the business organization, at 0.6% for taxable periods ending on or after December 31, 2019. That rate is down from 0.675% and, again, subject to the HB 4 trigger schedule. The BET filing threshold was raised in the 2019 budget: for taxable periods ending on or after December 31, 2019, a return is required if enterprise value tax base exceeds $217,000 or gross business receipts exceed $217,000. Below those figures, no BET return.

BPT paid is a credit against BET, which keeps the two from stacking in the simple case. A profitable New Hampshire LLC that pays salaries will owe one or the other, not both in full. A loss-year LLC that still has a meaningful payroll can end up owing BET without any BPT to offset it, which is the classic New Hampshire surprise: the business lost money and still has a state bill because the compensation component of the BET base does not care about profit.

For a single-member consulting LLC with $80,000 of gross receipts, no employees beyond the owner, and modest profit, the state tax picture is BPT on the profit (7.7% of net, after the BPT's own adjustments) and nothing else at the entity level, because the BET thresholds and BPT threshold are calibrated so that very small operations stay out of the BET regime entirely. For a five-person operating company paying $400,000 of compensation, BET enters the picture at 0.6% of that base, and the stack of BPT and BET starts to matter. Model both before you pick New Hampshire for an operating entity.

The registered-agent market, and what to expect locally

Every New Hampshire LLC needs a registered agent with a New Hampshire street address per § 304-C:33. The commercial registered-agent market here is smaller than Delaware's; the national chains serve the state, and there is a local cohort of attorney-registered-agent outfits and a handful of small independents. Prices run roughly $50 to $150 a year at the main commercial tier.

A New Hampshire resident can serve as the registered agent for their own LLC, and many single-member LLCs do exactly that. The risk profile is the same as anywhere: if you move, if you travel for weeks at a time, if service of process lands while you are not paying attention, you lose the default judgment you could have fought. For the cost of a subscription, the commercial agent absorbs that risk and forwards the April 1 reminder. For a discussion of the tradeoff that generalizes across states, see our registered agent, in-house vs commercial piece.

Who this state actually makes sense for

Three readers should take New Hampshire seriously in 2020.

The first is the New Hampshire resident running an operating business in New Hampshire. Domicile, operations, and filing all line up; the BPT-BET picture is the cost of doing business in the state either way, and forming at home avoids the foreign-qualification overhead that a Delaware or Wyoming formation would add under RSA 304-C:135. If you live and work here, form here.

The second is the Massachusetts or Vermont resident operating over the border, where the New Hampshire entity, properly used, can place certain income streams outside the reach of a neighboring state's personal income tax. This is a planning conversation with a tax advisor who knows both states, not a DIY move; Massachusetts in particular will test the substance of the arrangement. The BPT and BET are real costs in exchange for whatever personal-tax result you are chasing.

The third is the investor or passive-holding use case where the LLC is a holding vehicle for interest and dividend income, and the holder wants a state whose personal tax on such income is being scheduled down. The I&D tax at 5% is not zero, but it is the object of an active phase-down, and the BPT-BET regime does not reach a pure holding LLC below the gross-receipts thresholds.

Everything else (the out-of-state founder forming on the strength of "no income tax," the pass-through operating entity whose owners live somewhere else, the side-project LLC looking for a cheap state) is better served by a closer match between the owner's domicile and the entity's state. See our piece on choosing a state when you don't live there for the general-case version of that argument. New Hampshire's sticker price is friendly; its tax regime rewards residents and operating companies and quietly penalizes the out-of-state founder who expected zero state tax because nobody mentioned the BET.

If you are a New Hampshire resident forming this month, file online on QuickStart, calendar April 1, and pick a commercial registered agent at the mid-tier price if you travel. If you are forming in New Hampshire from another state because someone told you the state has no income tax, read the BPT and BET chapters once through before you pay the $100.

Sources

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