How to Start a Sole Proprietorship in New Hampshire

What is a sole proprietorship?

A sole proprietorship is a common type of business structure in which a single person is responsible for owning and operating a business. That person, the sole proprietor, is considered to be the same legal entity as the business, sharing a name and Social Security Number. With little setup time or cost, a sole proprietorship is often simple to establish, making it a popular choice. 

There is an unlimited liability in a sole proprietorship, meaning that the owner’s personal assets are at risk if there are business debts or obligations they must meet. 

What qualifies your business as a sole proprietorship? 

A business qualifies as a sole proprietorship when it is owned and operated by a single individual. While other business structures, including an S corp or full incorporation of a business, create a separate legal entity, that is not the case for sole proprietorships. Someone independently conducting business activity under their own name is considered a sole proprietorship, even with no formalization of the business. 

Who is it best for?

A sole proprietorship is well-suited for businesses that fall into specific categories. Often, service-based businesses thrive as sole proprietorships. Freelancers, consultants, photographers, writers, and other professionals who offer services directly to clients can benefit from the simplicity and ease of operating as a sole proprietor. These businesses typically have low startup costs, require minimal equipment or inventory, and can be operated successfully with a single individual.

 Additionally, small-scale retail and e-commerce businesses can also flourish as sole proprietorships. Independent online stores, boutique shops, artists selling their crafts, and local specialty stores often find flexibility and direct control over their business operations to be advantageous. Sole proprietorships allow these businesses to maintain close customer relationships, adapt quickly to market demands, and make swift decisions without the need for extensive bureaucracy.

How to set up a sole proprietorship in New Hampshire

To establish a sole proprietorship in New Hampshire, all you have to do is operate a business independently – many people are already running this type of business without knowing it. While the formation process is that simple, running your own business does have other requirements you may need to be aware of before moving forward. 

Naming your business

Like any business, you are able to choose the name you use for your sole proprietorship – but the structure is unique because this is not required and will not be the legal name of your business. Instead, you can either use your own name or the DBA process. 

Using your own name

There is no formal process to establish a sole proprietorship, so there is no time when you would file a name for the business. Instead, your legal name is considered the same as the business’s legal name without any steps being taken. You can operate a business under your name this way without using another. 

Setting up a DBA

If you do want to use a more public-facing business name or keep your legal name more private, a good option is to set up a trade name (sometimes called a doing-business-as) through the New Hampshire Secretary of State. You will need to make sure the name is available and not in use by another business, and you can then submit a Trade Name Registration Form and pay the $50 filing fee. 

How to Check if a Business Name is Taken

New Hampshire licenses 

There is no statewide general business license required in New Hampshire. The state also does not have any sales tax, which means no seller’s permit is necessary for businesses. The only state-level requirements are those imposed on certain professions, like medical practitioners or accountants, who must maintain licensing. 

Certain local governments may also have additional requirements. It is important to check with the city or county clerk anywhere you conduct business activities to ensure that there are no additional regulations you must meet. 

New Hampshire taxes

Sole proprietors are not considered separate from their business for tax purposes. When a business owner files their personal tax returns, they include business income and expenses on Schedule C (Form 1040) as a part of these returns. Any net business profit or loss is taxed at their individual tax rate, along with personal income and deductions. The IRS will use the owner’s Social Security Number as a tax ID. 

Depending on their income level and if they have another job, sole proprietors are also considered self-employed and may need to pay self-employment taxes. These account for contributions to Social Security and Medicare that an employer would typically handle.

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