“Having started a small business several years ago it was very frustrating to find out that I had not been as dialed in on taxes as I thought. Chris demonstrated professionalism and patience walking through what to do.”
How your small business is taxed depends first on how it is set up, then on where you operate. For a New Hampshire business, both layers matter. Here is the lay of the land.
Most small businesses are pass-through
Sole proprietorships, partnerships, and S-corporations do not pay federal income tax themselves. The profit passes through to the owners and is reported on their personal returns:
- Sole proprietor or single-member LLC reports on Schedule C. The net profit is subject to income tax and the 15.3% self-employment tax.
- Partnership or multi-member LLC files Form 1065 and issues each partner a K-1.
- S-corporation files Form 1120-S and pays the owner a reasonable W-2 salary, which can reduce self-employment tax on the remaining profit.
New Hampshire’s two business taxes
New Hampshire has no wage income tax, which surprises owners who then learn the state taxes business activity directly through two taxes:
- Business Profits Tax (BPT) is a flat tax on taxable business profits. You file only if gross business income clears a threshold (about $103,000 for 2024, adjusted periodically). The rate has sat in the mid-7% range in recent years.
- Business Enterprise Tax (BET) is a much lower-rate tax (0.55%) on the wages, interest, and dividends your business pays out. It has its own filing threshold (around $298,000 in gross receipts or tax base for 2024).
Many small operators stay under both thresholds. Once you grow past them, the filings are not optional, and BET paid can credit against BPT owed.
Don’t forget quarterly estimates
Pass-through owners have no employer withholding, so the IRS expects quarterly estimated payments on the profit. The same applies to New Hampshire business taxes once you are over the thresholds.
When the structure is worth revisiting
The right entity at $40,000 of profit is often the wrong one at $150,000. If your business is growing, it is worth checking whether an S-corp election or a different setup would save real money against the cost of running it. We walk through that on our small business service page, or call to run your numbers.
Frequently asked questions
Does New Hampshire tax small business income?
New Hampshire has no personal income tax on wages, but it does tax business profits through the Business Profits Tax (BPT) and Business Enterprise Tax (BET). Both have filing thresholds, so businesses below those levels are not required to file.
Should my small business elect S-corporation status?
Sometimes. An S-corp election can lower self-employment tax once profit is consistently high enough to justify a reasonable salary plus the added payroll and filing costs. It is not right for every business, and the math has to work.