A corporation is a business structure that provides personal liability protection by separating the owner’s personal assets from the business’s assets. Thus, a corporation is liable for the business’s actions and finances, while the owners (known as shareholders) are not.
Corporation Pros
- Corporations provide liability protection for the shareholders
- A corporation can raise non-debt financing by selling shares of the business
- Taxation may be lower than a sole proprietorship or partnership
Corporation Cons
- Corporations are more complex and expensive to set up than sole proprietorships, partnerships, and Limited Liability Companies (LLCs)
- At a minimum, corporations are required to hold an annual board of directors meeting and shareholders meeting, take minutes at the meetings, issue shares, etc., to maintain the entity’s liability protection.
Generally, Corporations are chosen over Limited Liability Companies when a significant amount of funding is being raised from investors. However, due to the cost and complexity of a Corporation, most small businesses are better off forming an LLC.
Related: How To Form An LLC In New Hampshire
The following steps are to create a domestic Corporation, which is the most common type for businesses. The other types of Corporations in New Hampshire include a foreign Corporation (an out-of-state Corporation wanting approval to physically operate in the state), a professional Corporation (designated for Corporations offering professional services), or a non-profit Corporation.
Related: New Hampshire Business Checklist
Steps to Forming a Corporation in New Hampshire
Step 1: Choose a Name
The first step in forming a Corporation in New Hampshire is selecting a name.
The name of the Corporation has to be different from other entity names in the state of New Hampshire. Check available corporation names in New Hampshire.
The name of the Corporation must include one of the following designators at the end of the business name:
- Corporation
- Incorporated
- Limited
- Or an abbreviation for one of those words: Corp., Inc., or Ltd.
A comma may be used after the business name and before the designator. For example, “Common Grounds Coffee Inc.” and “Common Grounds Coffee, Inc.” are both acceptable.
If there is a name you want but are not ready to register the Corporation, you can file the Application for Reservation of Name with the New Hampshire Department of State. The name reservation will hold a name for up to 120 days.
While a Corporation has to select a unique name that another New Hampshire Corporation isn’t using, that doesn’t guarantee the name isn’t currently in use by someone else. Before registering a Corporation name, be sure to do a trademark search to verify it is available for you to use.
Step 2: Choose a Registered Agent
To have a Corporation in New Hampshire, a New Hampshire Registered Agent must be identified to act as a service of process (a central point of contact) to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the Corporation. This can either be a resident of New Hampshire or a commercial registered agent service.
You can act as the Corporation’s Registered Agent in New Hampshire, and you are not required to pay for a registered agent. The requirements to be a Registered Agent are that someone is generally available during normal business hours at a physical street address in the state. A PO Box is not allowed.
Related: Do I Need To Hire A Registered Agent In New Hampshire?
Step 3: File the New Hampshire Articles of Incorporation
Next, you can start filing the Articles of Incorporation with the Department of State. The Articles of Incorporation can be filed on the Department of State’s website or with Form 11.
The information requested includes:
- The corporation’s name must contain the words “Corporation,” “Incorporated,” “Limited,” or an abbreviation.
- Principal office address (PO Boxes are not allowed) and mailing address if different from the business address.
- Information regarding the shares of the Corporation. This section includes the class of shares (common shares are most common), the number of shares authorized, and the par value of those shares.
- Initial Registered Agent’s name and physical address
- The purpose of why the Corporation is being organized. If the NAICS (North American Industry Classification System) code is known, the number can also be entered.
- Corporation or someone helping with the formation of the entity.
- If the Corporation will be a Benefit Corporation, identify by selecting “is” for the statement ”The above named business ___________ (is/is not) electing, by at least the minimum status vote defined by RSA 293-C:2 VII, to become a benefit corporation pursuant to RSA 293-C”. A benefit corporation is different from a regular Corporation by committing to higher standards of purpose, accountability, and transparency:
- Name, address, and title of the Corporation’s officers or directors.
- Name and address of the incorporator(s). These can be the owners of the Corporation or someone helping with the formation of the entity.
- A Statement of Compliance with New Hampshire Securities Laws should be included with the New Hampshire Articles of Incorporation if shares are being sold to investors.
The New Hampshire Articles of Incorporation can be filed online or submitted by mail. The mailing address is:
New Hampshire Department of State
Corporation Division
107 N Main St, Rm 204
Concord, NH 03301-4989
Step 4: Create Corporate Bylaws
Bylaws are the general guiding principles and procedures for a business’s operations. For example, the bylaws may include the name of the corporation’s officers, the responsibilities of the board members, terms of office, procedures for removing or adding a new director or shareholder, policies for adopting or changing amendments, authorizing new shares, voting rights, and more.
Step 5: Hold the Initial Board of Directors Meeting
During the first board meeting, the board of directors will, at minimum, elect the corporation’s officers (the President, Vice President, Treasurer, and Secretary). They will also typically review and approve corporate bylaws, choose a bank, issue shares of stock, and decide whether the Corporation will be taxed as a C corporation or S corporation.
Minutes should be taken at all meetings to protect shareholders from lawsuits and court actions. The minutes provide a written record of all decisions and actions taken during the meeting. Minutes aren’t filed with the state but should be stored with other Corporate documents.
Step 6: Issue Shares of Stock
The corporation can exchange shares of stock in exchange for money or services. The number of shares of stock issued cannot be more than the number of authorized shares listed in the Articles of Incorporation.
Step 7: Obtain an EIN
The EIN or Employer Identification Number (also called a Federal Employer Identification Number, FEIN, or Tax ID Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Like an individual’s social security number, the EIN identifies the Corporation for tax purposes. The EIN will be needed to hire employees, open a bank account, register for business licenses and permits, file tax returns, and more.
The EIN is free when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.
Step 8: Elect the Corporation’s Form of Federal Income Taxation
By default, a new corporation will be taxed by the Internal Revenue Service (IRS) like a C-Corporation. C-Corporations pay corporate taxes on their profits, and the owners pay personal income taxes on their dividends.
A Corporation can elect to be taxed as an S-Corporation. S-Corporations are taxed as “pass-through entities,” meaning the Corporation does not file corporate taxes. Instead, the profits (or losses) “pass through” to the shareholders, who then report this income on their individual taxes.
For most small businesses, the S-Corporation tax election is the most beneficial because it eliminates the double taxation of the C-Corporation. This tax election can be changed; however, it is highly recommended to talk with an accountant before making this decision.
Step 9: Open a Bank Account
Opening a bank account for your Corporation is important for liability protection as the bank account separates the business’s funds from the member’s personal funds.
Several documents will be needed to open a business bank account, such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original Articles of Incorporation showing the creation of the Corporation in addition to the bylaws.
- Driver’s licenses of the members.
- Depending on the age of the Corporation, a New Hampshire Certificate of Good Standing may be needed to prove the business entity is active and in good standing with the state.
Step 10: Apply for Business Licenses and Permits
Depending on what your business does and its location, various business licenses and permits will likely be needed before starting your business. Some common registrations include:
- Business License – All businesses operating in the State of New Hampshire are required to register with the New Hampshire Secretary of State’s Office. Additionally, some cities also require businesses to obtain licensing before they can start.
- Professional License – Certain services such as barbershops, accountants, hunting and fishing guides, and others must be licensed.
Related: How To Register A Business In New Hampshire
Step 11: File Annual Reports
Corporations are required to submit an annual report to the New Hampshire Department of State. The annual report is due each year before April 1st.
Step 12: Pay Annual Business Profits Tax and Business Enterprise Tax
Corporations in New Hampshire are subject to the Business Profits Tax (BPT) and the Business Enterprise Tax (BET). The BET is a tax on a corporation’s compensation paid out, including dividends and interest.
Every company with for-profit business activity in Nebraska having gross receipts over $50,000 must pay the Business Profits Tax.
