Choosing a Legal Form for your Business
Businesses can be legally incorporated in different ways and each way has its advantages and disadvantages. Legal forms of incorporation include Sole Proprietorship, Partnership, Limited Liability Company and Corporation. Each form has its own legal liabilities and ways of handling income taxes, protection of assets and transferring the business.
In a Sole Proprietorship, the owner of the business has sole responsibility for the operation of the business and all finances. In this form of business, the owner’s personal property is directly tied to the business property. Business profits or losses become the owner’s income or loss.
A partnership is similar to a Proprietorship, but the rights and obligations are shared among two or more partners. Business profits or losses are split among the partners. A partnership agreement should be filed with the Secretary of State’s office at NH Quickstart.
A corporation is a legal entity separate from the owner(s). It may be established by three or more persons of legal age and may issue capital stock to investors. Generally, the stockholders and officers of a corporation are not personally liable for the debts and contracts of the corporation. However, in certain instances individual liability may be imposed.
Corporations come in two forms: S Corporations or C Corporations. The two are similar, except for the way income from each is taxed. In an S Corporation, income is distributed and taxed directly to the shareholder. Income from a C Corporation is taxed at the corporate level and again at the shareholder level if distributed.
Limited Liability Company
A Limited Liability Company (LLC) is a hybrid of the Partnership and Corporation forms of organization. Stock may be issued to General Partners (those controlling the business) and to Limited Partners (those with an investment in the business). The majority of businesses in New Hampshire are LLCs. An LLC requires that you file a Certificate of Formation at NH Quickstart.
The federal Small Business Administration has more detail on these types of business structures.
After viewing the SBA resources, you should consult an attorney and a CPA regardless of which form of organization you are considering. These professionals can analyze your situation and make a recommendation. One of the best ways to find an attorney experienced in business law is to ask around to those you know and trust. Do you have a family member in the state who already has his or her own business? Does a friend of yours run a business? These are good places to start. The New Hampshire Bar Association lists attorneys practicing in the state, but does not provide recommendations, so it’s best to find one through people you trust.
Filing with the State of NH
After deciding what form your business should take, register it at NH Quickstart, the New Hampshire Secretary of State's Office one-stop solution for business filing.
State of Incorporation
For some businesses, it might make sense to incorporate in a different state than New Hampshire. For tax and other reasons, many companies incorporate in the state of Delaware. You can read about this process here.