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How Your LLC Will Be Taxed
In this guide, we’ll cover the main business taxes required in New Hampshire, including payroll, self-employment, and federal taxes. The profits of an LLC aren’t taxed at the business level like C Corporations. Instead, taxes are as follows:
- Owners pay self-employment tax on business profits.
- Owners pay federal income tax on any profits, less allowances and deductions.
- Owners pay federal income tax on any profits, minus federal allowances or deductions.
- Employers pay payroll tax on any wages they pay to employees.
- Employees pay state and federal taxes on their earnings.
Items 1, 2, and 3 fall under pass-through taxation for any LLC owners, managers, or members who receive profits from the business. Profits are reported on federal and state personal tax returns.
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State Taxes for LLCs
There are two types of state tax you might have to pay to your state Department of Revenue: New Hampshire state interest and dividends tax and business profits tax.
New Hampshire State Interest and Dividends Tax
As a business owner, you typically need to pay income tax on any money you pay to yourself. These earnings flow through to your personal tax return. In the case of New Hampshire however, there is no state income tax. Instead you'll be taxed a percentage on any interest and dividends income. The current interest and dividends tax rate is 5%.
New Hampshire Business Profits Tax (BPT)
If you operate a business within the state of New Hampshire, you'll have to pay taxes on any profits that you make. Businesses that gross less than $50,000 are not required to file for business profits tax. The current BPT rate in New Hampshire is 7.7%.
Federal Taxes for LLCs
As the owner of an LLC, you must pay self-employment tax and federal income tax, both of which are levied as “pass-through taxation."
Federal taxes can be complicated, so speak to your accountant or professional tax preparer to ensure that your New Hampshire LLC is paying the correct amount.
Federal Self-Employment Tax
All members or managers who take profits out of the LLC must pay self-employment tax. This tax is administered by the Federal Insurance Contributions Act (FICA), and covers Social Security, Medicare, and other benefits. The current self-employment tax rate is 15.3%.
You’ll be able to deduct some of your business expenses from your income when calculating how much self-employment tax you owe.
Here are some examples of how much self-employment tax you may need to pay, depending on your earnings:
- On profits of $44,000, you would pay self-employment tax of $6,732.
- On profits of $64,000, you would pay self-employment tax of $9,792.
- On profits of $84,000, you would pay self-employment tax of $12,852.
- On profits of $104,000, you would pay self-employment tax of $15,912.
Pay Less Self-Employment Tax by Treating Your LLC as an S Corporation
The Internal Revenue Service allows an LLC to be treated as an S Corporation for tax purposes, provided your business meets certain requirements. This can help you reduce the amount of self-employment tax you pay by allowing you to declare some of your income as salary and other income as distributions or withdrawals.
Speak to your accountant or professional tax preparer for more information on reducing your LLC self-employment tax through an S Corporation tax election.
Treating Your LLC as an S Corp Can Help You Save Money.
You can do this by making an “S Corporation Tax Election” with the IRS using Form 2553. We can file your Form 2553 with the IRS on your behalf.Get My LLC Treated As an S Corp
Federal Income Tax
You must also pay regular federal income tax on any earnings you take out of your New Hampshire LLC. The amount of income tax you pay depends on your earnings, current income tax bracket, deductions, and filing status.
You only pay federal income tax on profits you take out of the business, less certain deductions and allowances. This includes your tax-free amount, plus business expenses and other deductions for areas such as healthcare and some retirement plans.
Speak to your accountant for more information.
Employee and Employer Taxes
If you pay employees, there are some slightly different tax implications. Speak to your accountant to get clear guidance for your unique situation.
- Employer Payroll Tax Withholding
All employers are required to withhold federal taxes from their employees’ wages. You’ll withhold 7.65 percent of their taxable wages, and your employees will also be responsible for 7.65 percent, adding up to the current federal tax rate of 15.3%.
Speak to your accountant for more information.
Employees May Need to File Tax Returns
Regardless of whether you withhold federal and state income tax, your employees may need to file their own tax returns.
Employee Insurance and Other Requirements
You may also need to pay insurance for any employees, such as employee compensation insurance or unemployment tax.
Other Taxes and Duties
Depending on your industry, you may be liable for certain other taxes and duties. For example, if you sell gasoline, you may need to pay a tax on any fuel you sell. Likewise, if you import or export goods, you may need to pay certain duties.
Speak to your accountant about any other taxes or duties you may need to withhold or pay.
Estimated Taxes for Your LLC
Most LLCs must pay estimated taxes throughout the year, depending on the amount of profit and income you expect to make. The most common types of estimated tax are:
- Federal income tax
- Federal self-employment tax
- State income tax
Most LLCs will pay estimated taxes four times a year. Learn more on the IRS website, and speak to your accountant for more information.
FAQs on New Hampshire Business Taxes
Does New Hampshire Have a Sales Tax?
No, unlike most states, New Hampshire does not have a sales tax.
Does New Hampshire Have a State Income Tax?
No. Unlike most states, New Hampshire does not have a state income tax. Businesses are required to pay a business profits tax however. You can read more about it above.
Does New Hampshire Have a Franchise Tax?
No. New Hampshire does not have a franchise tax.
Do I Need to Pay Estimated Taxes?
Yes. In most cases, you must pay estimated taxes to the state and federal governments. You can find more information above.