Picking a business structure is one of the first decisions you’ll make when starting a business in New Hampshire. The business structure you choose defines your legal and tax obligations, so it’s an important foundation for your business.

In this guide, we’ll explain what a sole proprietorship is, the advantages and disadvantages, and provide a step-by-step guide to get your New Hampshire sole proprietorship registered and running.

Related: How to start a business in New Hampshire

What is a Sole Proprietorship?

A sole proprietorship is the simplest form of business structure that is owned by an individual who’s responsible for all areas of the business. It means your business is owned and run by you alone and there’s no legal separation between you and your business.

Besides sole proprietorships, other business structures include general partnerships, corporations, and Limited Liability Companies (LLCs). Each has its own features, but what makes sole proprietorships stand out is their simplicity and direct connection between the owner and the business.

Sole Proprietorship Advantages

Starting a sole proprietorship in New Hampshire offers several advantages:

• Lowest startup costs: With no formation documents to file, starting a sole proprietorship has the lowest startup costs.
• Tax simplicity: Sole proprietors complete Schedule C with their personal tax return. You don’t have to file a separate business tax return.
• Privacy: Unlike corporations and LLCs, sole proprietorship information isn’t public record. You can keep your business activities more private.

Sole Proprietorship Disadvantages

There are also some potential downsides to consider:

• Personal liability: Like other states, a New Hampshire sole proprietorship leaves the owner personally responsible for any business debts and obligations. This means your personal assets, like your home or car, could be at risk.
• Difficulty raising capital: As a sole proprietor, you can’t sell shares of your company, possibly making it harder to raise capital compared to a corporation or Limited Liability Company.
• Self employment taxes: A sole proprietor will pay self employment tax on their business income in addition to income taxes. For higher-profit businesses, this may be more costly than other options.

While a sole proprietorship has its benefits, it’s important to note that if liability protection is a key concern for you, forming an LLC in New Hampshire might be a better choice. An LLC offers personal liability protection, meaning your personal assets are safer from business liabilities.

Steps to Start a Sole Proprietorship in New Hampshire

Starting a sole proprietorship in New Hampshire is a straightforward process, as it does not require filing any legal documents with the state government to legally create the business entity. However, there are a few steps to cover to make sure the sole proprietorship business is legally set up.

Step 1: Come Up With a Business Name

As a sole proprietor in New Hampshire, the owner can operate their business under either their full first and last name. But if they want to operate under a specific business name, registration is required.

For example, consider Sarah Jennings, who plans to start a maple syrup production business. Instead of operating under her name – Sarah Jennings – she chooses the name “Maple Magic.” To use this name, she must register the DBA (Doing Business As) name “Maple Magic.”

Step 2: Verify Name Availability

Every business name registration must be unique and not too similar to any other names on record. Before filling out the form, visit the New Hampshire Department of State’s business name database to see if the name you want is available.

Related: How to search New Hampshire name availability

Step 3: File the Trade Name Form

If the name is available, the next step is to officially register it. In order to do so, you can fill out the online form or download the mail-in form (TN-1) and file the Trade Name form with the New Hampshire Department of State, Corporation Division.

Registering a New Hampshire assumed name won’t stop another business from using the name. For stronger legal rights to your name, you can apply for a federal trademark through the U.S. Patent & Trademark Office (USPTO).

Related: How to file a New Hampshire Trade Name

Step 4: Research Business License Requirements

Regardless of business structure, all businesses operating in New Hampshire need to register for the proper licenses and permits. Requirements vary based on location and business activities.

• New Hampshire state business registration: All businesses operating in the state must register with the NH Secretary of State’s Office.
• Local business license: Many cities in New Hampshire require a local business license. The rules for obtaining this license vary depending on where your business is located and what services or products it offers.
• Occupational license: Certain professions in New Hampshire are regulated and must be registered before providing these regulated services. Common professions requiring licensing include accountants, barbers, body artists, hunting & fishing guides, and manicurists.
• Employer Identification Number (EIN): While sole proprietorships without employees typically don’t need an EIN, hiring employees changes this. Additionally, some banks might require an EIN to open a business bank account. Otherwise, a sole proprietor can use their Social Security Number for tax purposes.

Related: What business licenses are needed in New Hampshire

Wrapping Up

In conclusion, starting a sole proprietorship in New Hampshire is a practical and straightforward path for many small business owners. The process, with its minimal paperwork and reduced complexity, allows you to get up and running quickly so you can focus more on growing your business and less on navigating legal intricacies.

We invite you to share your plans in the comments below. Are you thinking of going the sole proprietorship route? Or does another business structure appeal more to you? We’d love to hear why. And if you have any questions, don’t hesitate to ask. We’re here to help.