NH S Corps: How Decreasing Tax Rates Are Shaping Business Decisions

Why More NH Businesses Are Electing S-Corp Status

New Hampshire is seeing a rise in businesses electing S-Corp status, and it’s no surprise why. The state’s decreasing tax rates are creating a buzz in the small business community, making NH S Corps an increasingly popular choice. With potential federal tax benefits and a favorable local tax landscape, S-Corp status is quickly becoming a go-to structure for entrepreneurs aiming to maximize their financial savings.

We’ve covered the benefits of S-Corps in July’s blog and dived into some challenges in our October post, so feel free to check those out for more insights. But today, we’ll break down why NH S Corps are making headlines thanks to the state’s decreasing tax rates.

How Decreasing NH Tax Rates Make S-Corps More Appealing

Two key taxes in New Hampshire—the Business Profits Tax (BPT) and the Business Enterprise Tax (BET)—are seeing gradual reductions. This means that the overall tax burden on businesses is lightening, making S-Corp status even more attractive for those looking to reduce their tax liability.

S-Corps typically offer substantial federal tax savings by allowing business owners to avoid paying self-employment taxes on their share of profits. Combine this with NH’s shrinking tax rates, and the result is a win-win for small business owners aiming to retain more of their hard-earned income. As these rates continue to drop, we expect more businesses to take the plunge into S-Corp waters.

Electing S-Corp Status: Easier Than You Think

Electing S-Corp status might sound complicated, but it’s actually a fairly simple process. All you need to do is file IRS Form 2553, and voilà—your business could become an S-Corp. However, just because it’s easy doesn’t mean it should be taken lightly. This is a decision that should align with your long-term financial goals, and it’s a good idea to consult with a tax pro before jumping in. That’s where we come in!

Don’t Miss the Deadline for S-Corp Elections

One of the most critical aspects of electing S-Corp status is the deadline. If you’re thinking of making the switch, you’ll need to submit Form 2553 within 2 months and 15 days of the start of your tax year. Missing this deadline could delay the benefits for a whole year, so be sure to mark it on your calendar and plan ahead.

The 5-Year Lock-In Period: A Long-Term Commitment

It’s essential to remember that electing S-Corp status isn’t a short-term decision. Once you’ve made the switch, your business is locked into the S-Corp structure for five years. That means you’ll need to think carefully about your business’s future before filing that 2553 form. If the structure no longer suits your needs, switching back isn’t easy. That’s why doing a thorough analysis of your business strategy is crucial before making the call.

Steps to Determine If NH S-Corps Are Right for You

Considering S-Corp status? Start by reviewing your financials and growth projections. Look at your long-term plans and ask yourself if the tax benefits outweigh any potential downsides over the next five years. And, of course, don’t go it alone—talk to a tax professional to make sure the numbers and strategy align. It’s the best way to avoid surprises down the road.

Is S-Corp Status Right for Your Business?

New Hampshire’s decreasing tax rates make electing S-Corp status more appealing than ever, but it’s not a one-size-fits-all solution. Before you make the leap, weigh the pros and cons carefully. Between the federal tax savings and NH’s lightening tax burden, it could be a great opportunity for your business—but only if it aligns with your broader goals.

Get Professional Advice Before Making Your Move

Electing S-Corp status is a big decision, but you don’t have to navigate it alone. At AccountAbility, we’re here to help you determine whether S-Corp status is the right fit for your business. Whether you need help analyzing your financials or just want a second opinion, reach out to us! We’d love to assist you in maximizing your business’s potential.

Ready to have support with your finances and tax prep? Reach out to us!